Toespraak staatssecretaris Snel bij symposium 'The End of Tax Havens?'

Toespraak | 24-01-2019

Ladies and gentlemen,

Thank you. It’s good to be here and have the opportunity to talk about a subject that is close to all our hearts: combating tax avoidance and tax evasion. This is a key policy priority for me, as State Secretary for Finance. The terms ‘tax avoidance’ and ‘tax evasion’ are often used interchangeably. The invitation to this seminar refers to tax havens, inspired by the Panama Papers and SwissLeaks. Cases which involved tax evasion. There is no doubt about the need to tackle tax evasion. Tax evasion is illegal: if taxpayers evade the law, they must face a tough response. So I’m investing in extra investigative capacity at the Tax Administration so that we can do more to stop these practices. But I also want to tackle tax avoidance. Tax avoidance is not illegal, but it means paying less tax by exploiting the rules in a way that was not intended by lawmakers. And it’s tax avoidance that I want to focus on today.

A couple of months ago, CPB director Laura van der Geest said in an interview with the newspaper NRC Handelsblad that we need to do more to ‘curb’ the use of the Netherlands as a harbour towards tax havens. I also welcome the policy brief of the CPB which was published today, and which shows how the Netherlands is being used as an investment hub for international capital flows. This policy brief is building on the study by SEO economic Research commissioned by my ministry in the fall of 2018. Also SEO has mapped out financial flows through the Netherlands through letter box firms. These studies provide the necessary quantitative basis for policy makers. So I welcome the fact that we’re all pulling in the same direction today. That’s important, because our tax system and our international relations are founded on trust. We want our taxes to be fair. We owe it to our citizens, businesses and foreign partners.

This two-day seminar is provocatively titled ‘The end of tax havens?’. Followed by a question mark, mind you, because how should we go about achieving that goal? Today I’d like to tell you what steps the Netherlands is taking. For the last few decades the Netherlands has had a reputation as a pass-through country, or even – according to some – a tax haven. I have often explained why the latter is unjustified. The OECD defines a tax haven as a country that lacks transparency and shares little information. This is – or ever was - hardly true of the Netherlands. In normal usage the term refers to a country where companies can channel profits to, because very little, if any, tax is levied there. That has never been the case in our country. The profits of companies that operate in the Netherlands are taxed. The rate of Dutch corporation tax is around the EU average. Revenue from corporation tax is therefore a significant and stable part of the Dutch tax mix.

We are a committed participant in the OECD project, commissioned by the G20, to combat Base Erosion and Profit Shifting. And it was under the Dutch EU Presidency in 2016 that the first EU directive addressing tax avoidance was drawn up. What’s more, we’re wholehearted in our implementation of international treaties and agreements, going above and beyond what is required under the rules. That said, the Netherlands was – and still is – an open economy, geared towards international trade and investment. That’s vital for a country like ours, with its strategic location. It also means that the Netherlands invests in a good business climate that is attractive to international companies. Our tax system reflects the international orientation of our economy. This can be seen, for example, in arrangements to prevent double taxation. It’s important to us that Dutch companies operating abroad can compete on an equal footing with local businesses. So if profits have already been taxed in a foreign country at the prevailing rates there, we don’t want to tax them again in the Netherlands.

But there’s a flip side to this approach: companies can also use our internationally oriented tax system to erode the tax base of other countries. This is what gave us a somewhat shady fiscal reputation. I want to put an end to this practice, as it was never the intention of our tax system. Everybody should pay its fair share. If companies can defer taxation or avoid it altogether, the costs of public services will be passed on to citizens and businesses that do pay their tax on time. And that’s unfair. That’s why the Dutch government is committed to tackling this issue. Like I said, it’s why I’ve made combating tax evasion and avoidance one of my policy priorities. The twin pillars of my approach are first to protect the tax base, and second to foster transparency and integrity.

The key measure under the first pillar is the introduction of a withholding tax on interest and royalties. So, from 2021, we’ll be taking action targeting the 22 billion euros that flow directly from the Netherlands to low-tax jurisdictions. This will help us prevent the Netherlands being used as a harbour to tax havens and as a means to erode the tax base of other countries. This is a big and crucial step forward in the fight against tax avoidance. We also recently compiled a list of low-tax jurisdictions, which helps us combat tax avoidance. Our list goes a lot further than the EU’s: the EU names five countries, while our list has 21. They are all countries that either tax corporate profits at a rate of less than 9%, or do not tax them at all. This list shows we’re serious about fighting tax avoidance. I call on other countries to follow our example.

Moving on to the second pillar, one of our key measures is a stricter and more transparent approach to granting tax rulings. Tax rulings give companies advance certainty about the tax consequences of investments. And there’s nothing wrong with that per se, but in future we’ll look more closely at why a ruling is being requested. If the sole purpose is to save Dutch or foreign tax, and there’s no added value for the Dutch economy, we’ll no longer provide any advance certainty. We’ll also publish details of international rulings in order to increase transparency.

Ms van der Geest, you said in your interview that we must do more internationally. Solutions have the greatest impact if we work together. I couldn’t agree more. That was also the key message of the speech I recently gave in Paris, where I spoke with the OECD and my French counterpart about international and European cooperation in this field. Because unilateral measures to tackle tax avoidance, such as this withholding tax, have their limitations. Companies can get round this measure by setting up an entity in another country between the Netherlands and the tax haven. This is why I’m such a strong proponent of a coordinated international approach. Recent Franco-German proposals for a minimum tax, which will be fleshed out in the OECD in the months ahead, are a good conceptual match with my withholding tax. These proposals could even boost the effectiveness of my own measure. I’ll be following developments on this front in the OECD with great interest.

Ladies and gentlemen, I hope I’ve made one thing clear: the current Dutch government is working hard to ensure that everyone pays their fair share of tax. Does this mean that tax havens will soon be a thing of the past, as the title of this seminar may suggest? Well, we still have some way to go. If only because the Netherlands has far too little weight to bring about this change by itself. But the good news is that, following the Panama Papers and SwissLeaks revelations, both tax avoidance by multinationals and tax evasion are far higher up the political agenda than ever before. And that countermeasures have become an important priority for both the Netherlands and many of its international partners. Having said that, the problem remains a complex one. The flows of money are difficult to track, tax systems are complicated and regulations differ from one country to the next. That’s why I’m glad the CPB is holding this seminar. If we put our heads together, we can advance our quest for a world where everyone, from individual citizens to multinationals, pays their fair share of tax, and where we can all benefit from the services paid for by taxation.

Thank you.