Investors mull exiting Netherlands over tax

AMSTERDAM, June 18 (Reuters) - Private equity investors are threatening to leave the Netherlands due to a proposed law that could raise the tax they pay on investments to as much as 52 percent from 1.2 percent currently, investors said on Wednesday.

“If the government is proceeding with this law there is no reason for us to continue our activities. We will seriously consider going to do something else,” said Floris van Alkemade of Solid Ventures, a company which has invested in six Dutch IT start-ups.

The Dutch government proposed a law last month that aims to raise taxes on excessive management pay after a public outcry at multi-million windfalls on stocks and bonuses of executives. The law also impacts some private equity investors.

The government says it wants to clarify taxation rules on so-called “carried interest” rewards, which are returns on shares or other stakes in a company and are linked to a manager’s work.

Van Alkemade’s Solid Ventures invests in Dutch IT start-ups and relies only on the proceeds from the sale of a company.

About 17 venture capital companies have invested in about 50 start-ups in the past 18 months, Van Alkemade said.

“If they would quit it would also hit innovation in the Netherlands,” Van Alkemade added.

On Monday, the Dutch association of private equity companies, NVP, said the measure was unfair as it would also tax historical value increases of investments that had not yet materialised.

“We have received several notices that some managers are considering ending their seed funds. This would destroy a successful element of the government’s innovation policy,” the NVP said.

A legal advisory body to the Dutch government, De Raad van State, said in April it wanted the carried interest measure to be taken out of the tax proposal on excessive pay, as carried interest rewards were not excessive as a rule.

The Dutch parliament is still debating the tax proposal on excessive pay, as it is unclear to some parties how many people may be affected by the carried interest measure. The measure might impact about 500 people, the Finance Ministry estimates. (Reporting by Gilbert Kreijger and Harro ten Wolde; Editing by Paul Bolding)