Dutch Lawmaker Promises More Transparency on Tax Rulings
Dutch tax authorities will publicly disclose the type and number of rulings awarded to corporations every year, the country’s deputy finance minister pledged.
Eric Wiebes said during a June 1 plenary debate in the House of Representatives that he would require the country’s tax administration to issue an annual report offering a new level of insight into its rulings practice, which has recently come under fire.
A trove of information released to a Dutch professor March 27 under freedom of information laws created the suggestion that the unit attempted to conceal a type of tax deal known as “informal capital rulings” from both local lawmakers and foreign tax administrations. Lawmakers from across the political aisle have been demanding more clarity about the rulings practice since then.
During the debate, Wiebes repeatedly said rulings offer taxpayers legal certainty that is beneficial to the Netherlands’ ability to attract and retain foreign companies, and that they don’t abet tax avoidance. He argued the title of the plenary debate—Tax Deals with Multinationals—was a misnomer. “There are no deals here,” Wiebes said. “There are no negotiations. Everything that is possible under a ruling is also possible without a ruling.”
Informal Capital a Separate Category
Still, he acknowledged that the rulings practice is “shrouded in a veil of doubt” and described the new annual report as an important step toward removing this cloud of secrecy. Wiebes said the annual report would include a breakdown of the different types of rulings awarded rather than the overall number of advance transfer pricing agreements and advance tax rulings with no further specifics. The controversial informal capital rulings would constitute a separate category, he said, adding that roughly 10 such rulings were awarded every year.
The report will also disclose how many ruling requests were denied or not processed, as well as how many were withdrawn and on what grounds. In addition, the report will include a generic or anonymized example for every ruling category.
Footing the Bill
The plenary debate also touched on same-day revelations reported by the Dutch newspaper NRC Handelsblad that NFIA, the government agency that aims to convince foreign companies to set up shop in the Netherlands, had used taxpayer money to pay for tax advice sought by multinational companies from external advisory firms.
Outgoing Minister of Economic Affairs Henk Kamp confirmed that NFIA helped defray the cost of getting such advice in 11 instances, contributing 234.000 euros ($264,000) over 982 investment questions put to the NFIA in the last five years. He said this happened because, in those 11 cases, the agency didn’t have the personnel and know-how to answer “very specialized” tax-related questions from companies that were considering opening offices or factories in the Netherlands.
“When it seems that real profits can be gotten out of this for the Netherlands, the NFIA is prepared to foot half the bill when a study has to be performed to answer these questions,” Kamp said. He also pointed out that nine of those 11 companies made new investments of 151 million euros in the Netherlands that resulted in a total of 862 new jobs.
Lawmakers Object to Funding Advice
Kamp’s comments were met with derision and outrage from lawmakers during the five-hour debate in the House, and lawmakers repeatedly called on him to end the practice, which he said he wouldn’t do.
“I don’t see how we can sell to the Dutch population that taxpayer money is being used to help fund tax advice to bring down the tax burden of foreign multinationals in the Netherlands,” said Tom van der Lee from the Dutch Greens.
Noting that the NFIA contributed just 234.000 euros, Carola Schouten from the Christian Union said, “We are talking about sums of money that really don’t mean all that much to the average multinational. What’s more, I think they often have in-house tax advisers who can also look into all this.”
