Cabinet responds to Paradise Papers

Menno Snel, the Dutch State Secretary for Finance, has written to the Lower House in response to publications on the topic of the Paradise Papers. In his letter he has elaborated on how tax evasion is being tackled and broached the subject of the Dutch tax ruling practice. Mr Snel has announced that the cabinet is keen to root out businesses that fictitiously take up residence in the Netherlands for the sole purpose of moving around vast sums of money. The cabinet is currently putting together proposals aimed at withholding tax being levied on dividends, interest and royalties that are channelled to tax havens, as well as in abuse scenarios. Regulations governing trust offices are to be tightened up and the Netherlands Central Bank’s supervisory toolkit is to be expanded.

Central registration system

International agreements are in place providing for information concerning tax rulings having a cross-border impact – not just newly achieved ones, but existing ones as well – being exchanged between the countries in question. A central system has been created in which the details earmarked for exchange are documented. Now that the system is up and running (and has been since September 2017), the rulings with respect to which information is to be exchanged have duly been identified. The Netherlands has confirmed that information concerning the four thousand or so existing tax rulings should have been exchanged before the current year is out.

Procedure governing rulings being issued

Mr Snel has acknowledged that Procter & Gamble’s 2008 tax ruling was not achieved in accordance with prevailing agreements: the local inspector of taxes – in line with existing policy guidelines – before issuing the ruling should have erred on the side of caution by submitting P&G’s petition for the scrutiny of the Tax and Custom Administration’s tax ruling task force.

Departures from the prescribed procedure are not acceptable, which is why the State Secretary has ordered an investigation into whether existing tax rulings having a cross-border impact have been issued in line with the prescribed course of action. To this end the independent committee charged with the annual performance of a random survey of the tax ruling practice is being strengthened with two external experts.

Dutch version: Kabinetsreactie op Paradise Papers