Reuters has reported that:
Brit Insurance [has] said it [it] planning to move its tax base to the Netherlands and that it would put detailed proposals to shareholders in the coming months.
Here we go again is the obvious reaction.
The Treasury is taking steps (quite illogical steps in my opinion) to change the UK tax code to appease corporations on the basis that there is a valid model of tax competition in existence in the world when it is glaringly obvious that is not true, and despite that here we have another lemming fleeing over the edge to a small location without the financial muscle (and in this case I am quite sure, without the inclination) to bail it out when all goes wrong leaving policy holders exposed to risk for the sake of a few pence off the tax rate.
So why is the Netherlands a tax haven? I and my co-authors largely answered this question in this publication, but let’s summarise why. First, although it’s headline tax rate is 25.5% it has numerous deliberate loopholes in its tax system that allow companies to avoid tax. In particular it deliberately offers companies who would not otherwise seek to be resident within its territory the means to reduce their tax charges on interest, royalties, dividend and capital gains income
from foreign subsidiaries.
This is largely through an arrangement they call a ‚Äòparticipation exemption’ that exempts dividends and capital gains from subsidiary companies abroad from corporate income tax in the Netherlands. A second reason is the unusually large Double Taxation Treaty (DTT) network that substantially reduces withholding taxes on dividend, interest and royalty payments between treaty countries and the Netherlands which in combination with the participation exemption means that investment income enjoys very low rates of tax in the Netherlands. A third reason is the advance tax ruling system that gives certainty to
multinationals about how the income of their Dutch subsidiaries will be taxed.
Other reasons include new rules designed to attract group finance companies (in company banks, by any other name) which will also enjoy low tax rates in the Netherlands.
As a result it is thought that at least 20,000 ‚Äòmailbox’ companies use the Netherlands as a tax haven – little short of places like Jersey and probably with more money involved.
It deserves to be on any tax haven list as a result.