Dutch economists in EU institutions typically ask for higher taxes and austerity for the rest of the eu nations while trying to not talk about the zero-tax policy they themselves apply to corporation + laws that help in tax avoidance for corps with legal hq there.
> the zero-tax policy they themselves apply to corporation + laws that help in tax avoidance for corps with legal hq there.
There's no such zero-tax policy. There simply is the liquidatieverliesregeling, which allows you to subtract not-yet-subtracted losses from investments overseas from the profits in the HQ.
Shell is the common example. It has an HQ in the Netherlands, and many overseas investments. e.g. hundreds of places where it drills for oil in many different jurisdictions.
Suppose 9 of these of these do not find profitable oil and thus make a loss of $10 each, and 1 of these does find oil and makes a profit of $100. The total profit for Shell is $100-90 = $10. Corporate taxes only tax profits, that's true around the world.
However, because the 10 Shell entities are drilling for oil in 10 different jurisdictions, the one profitable company cannot deduct losses from other jurisdictions from its profits. Therefore the $100 is taxed at say 20%, so the income is $80. And the losses are still $90. So overal, worldwide Shell just made a $10 loss due to taxes, despite making a profit.
The Netherlands' tax regime simply states that if you have an HQ, you can deduct all those losses which you haven't been able to deduct before, from the profits of the HQ. That's in principle a fair form of taxation. Second, it doesn't benefit the Netherlands tax-wise, because it reduces the tax income in the Netherlands, while profits overseas are still taxed overseas and generate income for those local jurisdictions.
This idea that therefore the Netherlands has a zero-tax policy that's screwing other countries is nonsense. There are many other examples and discussions you can have about Dutch taxes creating issues overseas (the Netherlands is certainly not perfect), but the tax regime for corps with a legal HQ in the Netherlands isn't one of them.
> This idea that therefore the Netherlands has a zero-tax policy that's screwing other countries is nonsense. There are many other examples and discussions you can have about Dutch taxes creating issues overseas (the Netherlands is certainly not perfect), but the tax regime for corps with a legal HQ in the Netherlands isn't one of them.
Of Nike: “ The sports apparel maker used a common, legal method of shifting profits to a tax haven, according to the consortium’s research. First, it allocated ownership of its “swoosh” trademark and other intellectual property to a subsidiary in Bermuda, which has no corporate income tax. Then, its subsidiary in Hilversum paid royalties for the use of the trademarks to the Bermuda unit. The royalties counted as business expenses and in that way avoided taxation in the Netherlands.”
And more generally: “ The Netherlands long justified its laws by arguing that they encouraged multinational companies to establish their headquarters in the country, creating jobs and investment.
More recently, however, legal thinking and public opinion have turned.
Officials in Brussels have accused the Netherlands of violating the European Union’s rules by helping Ikea to shear its tax bill. And polls show that Dutch voters have become increasingly angry at what they see as special privileges for wealthy corporations paying little or nothing — middle-class residents of the Netherlands, by contrast, can easily pay more than half their income in taxes.”
IP cross-licensing/royalties is the biggest loophole when it comes to transfer pricing.
The reason is pretty clear. There's usually no independent measure of value (because it's not like Apple/Nike/etc are licensing their brand to third parties) so it's very difficult for a tax authority to dispute the company's valuation concocted out of thin air.
On the other hand, IP does cost money to develop, and it's often developed in one country but used in another. Presumably you wouldn't want to just remove IP tax-deductibility outright.
It's such an absurdly exploitable loophole, though, that I'm beginning to take the view that intra-group licensing arrangements should basically be ignored for tax deductibility purposes. Under my revised framework, companies can still deduct consolidated IP costs, but only at the HQ level (i.e. not in between subsidiary groups).
The end result would be Google Australia paying slightly more tax in Australia, but Google USA pays slightly less tax in the USA.
I really don't see that as a problem, given how rapacious these companies have been at exploiting the existing arrangements.
Interested to know if others have thoughts on this arrangement.
Not sure why you posted this, it has nothing to do with the favourable tax-regime for placing your HQ in the Netherlands which I specifically spoke about (liquidatieverliesregeling).
The royalties you mention have nothing to do with whether you have your HQ in the Netherlands. Second, it's the American company (Nike) that ultimately profits, due to a Bermuda company which actually has a zero corporate tax rate policy, not the Netherlands. The US can change its laws to tax the IP created there. All that happens for the Netherlands is that it's missing out on tax income that'd otherwise be generated locally here. We shouldn't pretend as if there's this one country that unilaterally decides and profits. Instead, these structures are based on mutual tax treaties, and in this case the US agreed, the US company Nike profits, and the Netherlands is missing out on tax revenue.
Second, that situation has already been rectified due to the new tax on royalties in the Netherlands.
I haven't seen any change in public opinion, it's always stated that large companies pay too little, small companies and employees pay too much. And that's pretty much true in all countries.
It's certainly not perfect here but I find the discussions are often misguided and lacking nuance. I also find that many journalists just don't get it right.
