Country Rankings - Netherlands
Oct 18, 2017 Netherlands: post-BEPSAnother country where middle-income earners seem to be clobbered is the Netherlands, where at the moment taxpayers earning more than approximately EUR67,000 per year can expect to see more than half of their income taken in income tax. The Dutch individual income tax system is also notoriously complex, with income categorized into various "boxes" depending upon where it comes from. But the incoming Government, due to be formed over six months after the last election took place following a long-awaited agreement between a group of mostly right-of-center parties, is attempting to put a stop to all that. The new program for government proposes that the income tax schedule be compressed into just two brackets, of 38 percent and 49 percent. This at least reduces the top rate of tax below the key psychological 50-percent mark, and the attempt to streamline the current regime – apparently, the tax authority has warned that it is approaching breaking point in its attempts to administer the existing system – is admirable. But I was still quite struck that the lowest rate of tax is approaching 40 percent under the reforms. That's more than the current top federal rate in the US, where most people are inclined to think that their taxes are already too high. Still it's progress, I suppose. And even though elements of the coalition agreement were leaked ahead of its official announcement, the extent of the tax cuts included in the program came as something of a surprise, containing as it does corporate tax cuts, the removal of dividend withholding tax, and a tax on royalty payments to low-tax jurisdictions. It's an interesting plan because it provides further evidence of how governments are juggling their commitments with regards to tax. On the one hand, they are plugging the gaps that contribute to BEPS – and the Netherlands has been accused of being a particularly aggressive facilitator of profit shifting – and, on the other hand, they are committed to competitiveness, hence regular corporate tax cuts, and in the Netherlands' case also, the dividend tax proposal. Even though the latter may be contentious again from a BEPS standpoint, you could call it a typical tax plan for the post-BEPS era.
Oct 03, 2017 Netherlands: competitiveBEPS may have led multinational entities to take a more cautious approach to tax planning in many parts of the world but governments are still attempting to wring any competitive advantage they can out of their tax systems. The Dutch Tax Plan for 2018 and the accompanying Budget for next year is a classic example. Changes to the Dutch dividend withholding tax will improve the country's attractiveness as a holding company jurisdiction – just the sort of activity the Netherlands is often condemned for encouraging. So it seems like a contrarian measure to take in the context of BEPS and increasingly vocal complaints from transparency advocates that the Dutch corporate tax regime establishes the Netherlands as one of the world's largest tax havens. But one of the many unintended consequences of the BEPS project has been the intensification of tax competition. We know this from the sudden upsurge in corporate tax-rate cutting over the last couple years. After all, there's nothing in the BEPS reports that says you can't cut corporate tax by a couple of percent here and there. Indeed, perhaps another unintended consequence of BEPS is that it has highlighted the need for countries to compete on tax. Even despite BEPS, and the huge cultural change that is taking place with regards to tax avoidance, countries must consider that it's still necessary to compete, otherwise they would have stopped long ago. This might sound depressingly Darwinian to those with a more egalitarian view of taxation and its role in society, but as far as the fight for FDI is concerned, it's a jungle out there.
Jan 16, 2017 Netherlands: indecisiveAnother country attempting to reposition itself in a post-BEPS world is the Netherlands. Judging by Finance Minister Jerome Dijsselbloem's apparent backpedaling on the matter of corporate tax, the Dutch Government is struggling to decide exactly where it should stand. Tax-wise, the Netherlands looks much alike any other high-tax Western European country. It has a tax-to-GDP ratio of 40 percent and at 25 percent corporate income tax isn't especially attractive. But the country has something going for it (otherwise half of the fortune 500 wouldn't be there), and foreign direct investment would not have averaged almost EUR45bn (USD47.8bn) from 2003 to 2016. An attractive set of withholding tax exemptions, a large and favorable tax treaty network, low taxation of income associated with intellectual property, and other tax deductions have a lot to do with its standing as a hugely popular domicile for holding companies and European HQs. Dutch policies have earned the country a bad reputation internationally, among those campaigning for tax justice at least. Even President Obama labelled the Netherlands a tax haven in the early stages of his presidency. And certain tax arrangements have of course landed it on the radar of the OECD and the European Commission's new state aid police. The Netherlands' commitment to BEPS could spell the end of tax privileges for some multinationals. While it wants the Fortune 500 companies to remain, like any other country, it also wants to be seen as a respectable global citizen, and not as a tax haven. So, does it risk respectability and cut corporate tax to maintain competitiveness, as the conservative People's Party proposes? Or risk competitiveness to regain respectability by raising corporate tax, as Dijsselbloem, of the Labor Party, suggests? With any luck, this will be settled by the upcoming election. And investors will be hoping that the result isn't as indecisive Dijsselbloem appears to be on the subject.
Sep 06, 2016 Netherlands: attractiveTo be fair to Prime Minister Mark Rutte, it was probably quite sensible of him to ask Silicon Valley's thriving community of tech companies what his country should do to the tax regime to maintain the Netherlands' competitiveness. The reply, though fairly comprehensive in scope, was hardly earth-shattering however. Essentially, it urged the Dutch Government to do nothing. Sure, corporate tax could be a little lower, but all the essential ingredients are in place, he was told. One gets the feeling that Rutte wanted to ask a different sort of question though. The Netherlands has been saying for about a year now that it intends to prioritize measures to prevent tax avoidance, to fall into line with BEPS, without actually doing a huge amount about it. That's probably because it knows it's in a bit of a dilemma. The Netherlands has created an ideal tax regime for multinational holding and headquarter companies, as well as for companies with large amounts of income derived from intellectual property. Just the sort of tax regime in fact that is generating a lot of criticism internationally for facilitating tax avoidance, and that the OECD is trying to discourage through its BEPS work. Yet, as the Silicon Valley firms pointed out, it is a tax regime which helps support hundreds of thousands of Dutch jobs in US firms alone, and keeps the Netherlands punching above its weight as a business and investment location. So, I suspect that what Rutte really wanted to ask Silicon Valley was, "we're thinking about dismantling a tax framework that you all love. Would you still invest in us if we did?" Now, that really would be a silly question!
May 15, 2014 Netherlands: in shtuck, like all the restFor a sad contrast, let's look at the Netherlands, where the parties are bickering over how to rearrange the deck-chairs on the Titanic. In power, there is one of the deadly left/right coalitions that have infected Europe in recent years (see also Italy and Germany). When neither left nor right can provide the answers, I suppose it makes sense to have both of them. The left wing wants taxes to be "fairer and greener," which includes extra taxes on wealth. The right wing would like to replace an "entitlement" structure with lower labor taxes across the board. Needless to say, they can't agree. 52 percent is the proportion of GDP spent by the Government; the top rate of individual tax is the same, 52 percent. Public debt has increased every year since 2008, and is reckoned to reach 73 percent of GDP in 2014. The government's deficit was 4.5 percent in 2013. Unemployment is about 8.5 percent, while youth unemployment is "only" 13 percent, just about half the EU average. What can they do? The Government, I mean. I know what the citizens can do: leave, or cheat.
Feb 27, 2014 Netherlands: socializingIt's reassuring to know that the Benelux countries are going to fight against the exploitation of workers by unscrupulous Chinese gang-masters. Well, that wasn't exactly what they said: the Netherlands, Belgium and Luxembourg agreed to fight against social dumping, among other woes besetting honest working folk. This is the heartland of the EU's social partners zone, in which sound economic principles are tossed out of the window in an attempt to insulate workers against the rigours of competition. The C-word, which never should be spoken in the halls of EU governance. So what is social dumping? Like dumping in trade relations, it refers to an attempt to win by using your natural advantages in order to gain economic benefit. You come from a poor country, and you're prepared to work for less in order to feed your children back at home? That's social dumping. You place a contract with a cheap shoe manufacturer in Vietman which has the effect of putting Liege leather workers on the dole? That's social dumping (by you) as well as trade dumping (by the Vietnamese). You get the picture; and notice that both types of "dumping" actually have the effect of benefiting the consumer. The right way to deal with "dumping" is to help the threatened workers to adapt and improve, to become more competitive in other words, rather than to protect them with this farrago of mealy-mouthed and economically illiterate propaganda. But the "social partners" are deaf to such advice. Sadly, they will continue to destroy their childrens' future prospects with their well-meant but wrong-headed gibberish.