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Dutch Finance Secretary Wants to Investigate Uber Tax Avoidance

By: Sarah Paez & Elodie Lamer 

 

Dutch State Secretary for Finance Marnix van Rij said he wants to investigate whether the Dutch tax service followed correct procedures in reviewing Uber’s tax affairs and inform the parliament of the Cabinet’s findings.

 

“I asked the tax service what has happened there, and they have told me, ‘We have followed the procedures,’ but I want to investigate that, of course, more. And I want to report it also to parliament,” van Rij said during a July 12 event on taxation from the Dutch perspective hosted by the Brussels-based think tank Centre for European Policy Studies.

 

Documents leaked to the International Consortium of Investigative Journalists, The Guardian, and other media partners reportedly reveal that Uber used remote encryption and kill switches to interfere with government investigations — including tax investigations — in several jurisdictions, including the Netherlands. Uber also offered up information on its drivers to shield its corporate tax matters from authorities.

 

Van Rij said he does not know if every allegation reported in the media — based on millions of emails released July 10 — is correct. “I always think this type of publication is very serious,” he said, adding that he wanted the Dutch parliament to have the same information as the Cabinet regarding Uber’s tax affairs in the Netherlands.

 

Van Rij acknowledged that “the Netherlands had something of a reputation when it came to taxation and tax avoidance.” However, he deflected blame for the corporate tax system that allowed the Netherlands to become a destination for passthrough financial flows on their way to tax havens. The attractive double taxation treaty network, fiscal unity rules, participation exemption, advance tax rulings, and lack of withholding tax on interest, royalties, and dividends were initially intended for Dutch companies, which were “spreading their wings all over the world” and needed to avoid double taxation, he said.

 

The Netherlands has also taken many steps to rectify its “badly damaged” reputation as a tax haven, such as implementation of the first and second EU anti-tax-avoidance directives and the introduction of a conditional withholding tax on interests and royalties, with a planned withholding tax on dividends that head to low-tax jurisdictions, van Rij said.

 

These unilateral measures have decreased passthrough flows from the Netherlands to low-tax jurisdictions from €38.5 billion in 2019 to just under €6 billion in 2021, van Rij said, adding that the government would like to see those flows reduced to zero.

 

The government also supports the European Commission’s Unshell proposal, which would establish transparency standards on income, staff, and premises around the use of shell entities to detect abuse, according to van Rij. “I really call on our European counterparts to address this issue together in the second half of this year because payments can just as easily be channeled through other countries,” he said.

 

Recovery Plan Is a Mixed Bag

Months after its peers, the Netherlands submitted its recovery and resilience plan (RRP) July 8 to the commission. The submission was delayed partly because it took nine months to form a government after the March 2021 election.

 

The Czech Republic holds the presidency of the EU Council. After chairing its first finance ministers meeting July 12, the Czech presidency welcomed the submission of the last RRP because it will allow member states to start discussing the implementation of RepowerEU: the commission’s plan to make Europe independent from Russian fossil fuels well before 2030. Part of the EU-dedicated funds that will not be used for the post-COVID-19 recovery will be used to finance investments to be able to phase out Russian gas.

 

The Dutch RRP includes many tax measures, though the Dutch press (Trouw and Handelsblatt) have underlined that one tax measure was missing: the mortgage interest deduction, which the commission would like to see scrapped. In its 2022 country-by-country economic recommendations, the commission said that the relatively high borrowing limits contribute to a strong debt bias for households.

 

Van Rij said the Dutch government is partly to blame for not being more transparent about all the actions it has taken to make the mortgage interest deduction fairer. Homeowners are only allowed to deduct mortgage interest at a rate of 37 percent (not 49.5 percent), he said. Also, houses worth more than €1 million are treated as investments, meaning the taxes are much higher because the homeowners pay more in so-called fictitious income, he said.

 

The commission was hoping that the recovery plans — EU funds in exchange for reforms — would address many of its economic recommendations, including tax issues. However, its assessments of the national RRPs showed that its recommendations have only been addressed partially or inadequately. The commission has two months to assess the Dutch RRP, which includes many measures against aggressive tax planning.

 

“In cases where a current tax treaty with a low-tax country prohibits the Netherlands to levy this withholding tax, the Netherlands will renegotiate the current tax treaty with the aim of making this possible,” the RRP says. If a country changes its tax legislation so that it is no longer designated as a low-taxed state, the renegotiation of the treaty will no longer be necessary. If a negotiation is necessary and the desired result is not achieved, the Netherlands would consider canceling the treaty as an ultimum remedium, the RRP says.

 

The Netherlands has 19 tax treaties in force with developing countries, and 14 of those contain antiabuse provisions, the RRP noted, adding that bilateral negotiations are underway with three countries.

 

The RRP contains environmental taxation measures, including an increase in the air passenger tax rate (currently €7,947 per departing passenger) in 2023. Although the RRP does not specify how much the rate will change, it said it expects to raise €400 million in additional revenue. The tax will be heavier on short-haul tickets to discourage those flights, the RRP says. The government also hopes it can make the use of natural gas more expensive and the use of electricity cheaper via tax measures. In 2030 drivers will pay taxes on the number of kilometers driven.

Company Tax Notes
Category FREE CONTENT;ARTICLE / WHITEPAPER
Intended Audience CPA - small firm
CPA - medium firm
CPA - large firm
Published Date 07/12/2022

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