Government tackles tax avoidance and evasion

The government has agreed to adopt a new tax policy agenda proposed by State Secretary for Finance Menno Snel and to move forward with the agenda’s first priority: tackling tax avoidance and evasion.

The agenda identifies five priorities for the next few years: tackling tax avoidance and evasion; reducing the tax burden on labour; promoting a tax climate in the Netherlands that remains competitive for real economic activities; further greening the tax system; and making the tax system more workable.

The state secretary writes that these priorities are a major step towards a better tax system. ‘But obviously, the system is not yet complete,’ he adds. ‘During and after this government’s term in office, we must continue to pursue a simpler, more workable, more comprehensible and fairer tax system, with a view to ensuring equitable taxation for individuals and businesses alike.’

Tackling tax avoidance and evasion

Mr Snel’s policy on combating tax avoidance and tax evasion comprises two pillars: protecting the tax base and promoting transparency and integrity.

Introducing a withholding tax

In 2021 the Netherlands will introduce a system of withholding taxes on interest and royalty flows to low-tax jurisdictions and in the event of abusive tax arrangements, so as to prevent the Netherlands from being used as a conduit to tax havens. ‘My aim is to tackle tax avoidance and evasion and put an end to the Netherlands’ image as a country that makes it easy for multinationals to avoid paying taxes,’ says the state secretary. ‘This stubborn image undermines the investment climate.’

Treaties

The government wishes to equip both the Netherlands and its treaty partners with effective tools to combat tax avoidance. With this in mind, the Dutch government is including more anti-abuse provisions in its tax treaties via the Multilateral Instrument than many other countries. This can prevent the Netherlands’ extensive network of tax treaties being used improperly.

Going beyond the EU directives on tax avoidance

In implementing the EU’s first and second anti-tax avoidance directives (ATAD1 and ATAD2), the Netherlands will impose stricter standards than those required by those directives. For example, it will not include a group exemption in the earnings stripping rule. In addition, no grandfathering rules will apply to existing loans, and the threshold will be lowered from €3 million to €1 million.

A minimum capital rule will be introduced for banks and insurance companies in order to foster a more equal treatment of debt and equity in all sectors. This will create more stable companies and healthier economic conditions.

The right of non-disclosure and the publication of fines

The importance of transparency when it comes to combating tax avoidance and evasion is self-evident. The government will therefore continue to pursue the previous government’s policy aims on this front. It will clarify the right of non-disclosure as it applies to lawyers and notaries. Fines for culpable negligence will be made public, and as a result, these financial service providers will have to better account for the advice they give on tax planning schemes.

The integrity of financial markets

To increase the integrity of financial markets, the government is working on legislation to create a register for ultimate beneficial owners. Existing legislation for trust offices will be tightened up.

EU initiatives for a change in culture

The government supports the European Commission’s proposals for greater transparency. The Commission’s proposed directive on mandatory disclosure will require financial intermediaries (e.g. tax advisers, lawyers, notaries and trust offices) to notify the tax authorities of potentially aggressive cross-border tax planning schemes. The proposed directive on public country-by-country reporting will reveal the extent to which multinationals comply with their tax obligations.

Ministry responsible