From Fiat and Google to Ferrovial, this is how the Netherlands attracts big companies
The announcement that construction company Ferrovial would move its financial headquarters to the Netherlands drew criticism from the Spanish government. The company points out that the decision relates to the fact that most of its business is abroad and its intention to further its internationalization. The fact is that the company is moving to a country with more favorable taxation, following the path paved by such giants as Fiat, Google, the Italian oil company Eni and several American pharmaceutical companies.
But what should the Dutch tax system have to attract big business? “Until 2021, the lack of withholding taxes on interest and ‘royalties’ was very attractive for companies,” explains Arjan Ligur, professor of public finance at Tilburg University. This situation encouraged tax evasion through the so-called “Dutch sandwich”, used by companies like Google, among others.
As this expert explains, this has been the most common formula for tax evasion on European lands, and with it public coffers stop the entry of about 22,000 million annually worldwide. The company in question sets up a shell company in the Netherlands – without real employees or activity – and through it directs the income generated in other European countries for later transfer to a tax haven.
Profits and settlements
The Netherlands does not charge a surcharge on earnings earned abroad, which facilitates this inflow of funds and is a huge advantage for companies – in Spain, these incomes have a surcharge of 5%. In the case of corporate tax, although the general rate is around 25% in both countries, the first €200,000 of income is taxed at 19% in the Netherlands.
But the main attraction of the Dutch system is the “high tax certainty” it offers. “Low or minimal taxes on dividends are also important, along with the ability to make tax judgments in advance,” Ligure notes. The country has also entered into special tax agreements with other regions that practically reduce the tax burden.
Spain, on the other hand, is part of the group of large European economies where companies are making the most financial effort. New tax figures introduced in the past five years and increases in existing taxes have made the country the fifth most unfavorable economy on the continent for business activity, according to the “Fiscal Competitiveness Report 2022,” prepared by the Institute for Cheap Economic Studies. . Only France, Italy, Portugal and Ireland have worse tax terms.
This fact is no stranger to companies that move their financial headquarters to more favorable climates. Thus, in 2019, countries such as the United Kingdom, Germany and France stopped bringing in billions of euros, which went to Belgium, Luxembourg and the Netherlands, among others, due to more beneficial tax rules for businesses. That same year, Spain lost €21.1 billion in business tax revenue, according to data compiled by the US Bureau of Economic Research.
common tax rate
Tax evasion costs member states around 50 billion euros annually. According to Ligor, this is possible thanks to community directives, which abolished withholding taxes between EU countries. He criticizes that “multinational corporations misuse it to evade taxes”. There are different formulas for avoiding this type of illegal activity. One solution could be an “agreement” between the 27 countries on a common withholding tax in the bloc for money flows to other countries. He points out that another possibility is to reach an agreement on the European corporate tax on large companies.
Member states agreed in December to impose a minimum general rate of 15% corporate tax on large companies, and in the same week the government began procedures for its incorporation into Spanish legislation. In total, 137 countries will apply this regulation, which will affect companies with financial income of more than 750 million euros per year.
The dispute with the United Kingdom over the trip of the Dutch companies Shell and Unilever
The Dutch government warmly welcomed Ferrovial’s decision to land on its soil and ensured that the country would offer “exceptional treatment” for the companies. This statement by Mark Rutte’s management contradicts, however, the journey of two large national companies in recent years: the oil company Shell and the food and soap manufacturer Unilever.
Both packed their bags to move to the United Kingdom, seeing how their country eliminated some tax benefits and aligned its policies with the rest of the European Union to combat tax evasion.
The Dutch surcharge on dividends is low compared to other European countries, but post-Brexit, it is close to 0% in British territory. The refusal of the government in The Hague to withdraw these taxes persuaded Unilever – the parent company of brands such as Dove, Axe, Knorr, Helmann’s and others.
Housing problem
Shell followed in his footsteps shortly thereafter, after verifying that there were no tax benefits and after a groundbreaking national ruling that forced it to reduce the pollution from its activity. Both companies also complained about the great uncertainty in making investments.
The strategic advantages offered by the Netherlands, such as Rotterdam’s access to an international port, have been eclipsed in recent years with the great problems plaguing the country. The most important of which are: the lack of housing for citizens and foreigners, and the absence of employment.
On the other hand, the United Kingdom offers significant tax advantages in the “post-Brexit” era, as it does not have to abide by European rules. It has good communications and is also one of the most important financial and investment centers in the world.
Both packed their bags to move to the United Kingdom, seeing how their country eliminated some tax benefits and aligned its policies with the rest of the European Union to combat tax evasion.
The Dutch surcharge on dividends is low compared to other European countries, but post-Brexit, it is close to 0% in British territory. The refusal of the government in The Hague to withdraw these taxes persuaded Unilever – the parent company of brands such as Dove, Axe, Knorr, Helmann’s and others.
Housing problem
Shell followed in his footsteps shortly thereafter, after verifying that there were no tax benefits and after a groundbreaking national ruling that forced it to reduce the pollution from its activity. Both companies also complained about the great uncertainty in making investments.
The strategic advantages offered by the Netherlands, such as Rotterdam’s access to an international port, have been eclipsed in recent years with the great problems plaguing the country. The most important of which are: the lack of housing for citizens and foreigners, and the absence of employment.
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