Tuesday, September 10, 2013

Amsterdam getting more famous for tax haven activities than for its red light district.

We've just blogged the Netherlands' official admission that its history of serving as a conduit tax haven may have been causing great damage to other countries. Now our colleagues at SOMO in the Netherlands have published a new report providing some more details. It is entitled Avoiding Tax in Times of Austerity. The full report is here, and a press release accompanying it is below.
Large number of Portuguese multinationals shift activities to the Netherlands to avoid taxes
Crisis ridden country loses much needed income

SOMO, Sept 09, 2013

The financial crisis has hit Portugal extremely hard. Government expenditure has been cut time and again, and taxes have been raised. Family households and small and medium enterprises suffer the consequences. Portuguese multinationals, however, have been shifting more and more of their economic activities to the Netherlands since the crisis began. Meanwhile, 19 out of the 20 biggest Portuguese multinationals are using a letterbox company in the Netherlands in order to pay fewer taxes in their home country.

In a new report, the Centre for Research on Multinational Corporations (SOMO) brings together information from the IMF, the OECD and the Dutch Central Bank, and concludes that the Netherlands is the biggest tax sink for Portuguese corporate taxes.

Previously the European Commission estimated the amount of missed income through tax evasion, throughout Europe, at € 150 billion per year. This amount equals the entire annual EU budget. According to SOMO’s calculated estimate, Portuguese multinationals shifted at least € 2.5 billion in profits, in the period from 2009 to 2011.

The Dutch Connection
The large financial flows from Portugal to the Netherlands and back again, show that investments from and to Portugal are not real ‘investments’ but rather ‘round-trip’ investments, in which Dutch letterbox companies are used to avoid paying taxes in Portugal. In the SOMO report a case study is used to show how the Portuguese energy company EDP uses ‘The Dutch Connection’ to pay considerably less taxes in its home country.

SOMO researcher Rodrigo Fernandez explains: “The international fiscal architecture is outdated. In these times of globalisation and hyper-mobile capital, it is far too easy for large companies to avoid paying taxes. Leaving workers and small and medium enterprises with the consequences of this historical crisis.”
An email from Fernandez noted that there has been a flurry of recent interest in the Netherlands' tax haven industry, and added:
"Finally Amsterdam is getting more famous as tax haven than its red light district."
One can, of course, think of a few close parallels between these two industries. And is it a coincidence that the Red Light district has been adjacent to the stock exchange since the 16th Century?


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