Government stepping up support to developing countries on tax issues
The Netherlands has agreed on the inclusion of anti-abuse provisions in tax treaties with five developing countries. Negotiations with Ethiopia, Ghana, Kenya, Malawi and Zambia have been successfully completed. ‘These are just the first five out of a total of 23 countries with which we want to reach agreement on combating tax avoidance,’ says Minister for Foreign Trade and Development Cooperation Lilianne Ploumen. ‘We’re now starting to see real progress. It’s only fair that a company should pay a realistic amount of tax in the country where its operations actually take place.’
At present, talks are being held with another seven countries on inserting anti-abuse provisions into tax treaties. As a rule, bilateral tax treaties provide Dutch companies certainty about taxing rights, which encourages investment in the countries concerned. They also strengthen administrative cooperation between governments thanks to arrangements on the exchange of tax information and administrative assistance to combat tax avoidance. ‘Paying tax in the country where the income is earned is the norm,’ explains State Secretary for Finance Eric Wiebes. ‘That is what the Netherlands is working for. The Netherlands wants to lead the way in amending treaties with developing countries.’ New agreements with several countries are expected to be concluded before the end of the year.
Besides revising tax treaties, the Netherlands is also helping to strengthen tax administrations in developing countries. An example is its contribution to the Tax Inspectors Without Borders programme in Ghana, in which Dutch tax officials are giving their Ghanaian counterparts training on issuing tax assessments to multinationals. The Netherlands is providing assistance of various kinds in over ten other countries to enable local tax officials to raise the quality of their work.
A new initiative in this area which the Netherlands is pursuing with other donors is the ‘Addis Tax Initiative’, which is intended to generate substantially more resources for capacity building in the field of tax. ‘It’s about taking a coherent approach,’ explains Ms Ploumen. ‘On the one hand better tax rules, on the other training qualified inspectors who can actually collect the tax.’ The aim is to launch this initiative at the Financing for Development summit in Addis Ababa in mid-July.
Also new is the Netherlands’ role in the OECD initiative to help 14 developing countries take part in the Base Erosion and Profit Sharing (BEPS) negotiations in Paris, designed to reduce tax avoidance. The Netherlands will assist in various ways, including by ensuring that developing countries have the expertise they require to participate in the negotiations.