AMSTERDAM (Reuters) - Dutch Prime Minister Mark Rutte on Wednesday returned to parliament for the second time in a week to defend a tax cut that benefits Anglo-Dutch multinationals and British equity investors in general.
Rutte’s unexpected decision to scrap the 15 percent dividend withholding tax has fed into a mood of public resentment at large companies widely perceived as being taxed too lightly.
Populist lawmaker Geert Wilders loudly questioned why the Dutch should approve a measure that benefits foreigners.
“This is about jobs,” Rutte said of the tax cut, after acknowledging protesters in the public gallery.
“It’s important that we have a strong industry made up of a rich tapestry of small businesses, mid-size businesses, but also large companies ...that we know are very important for jobs.”
According to Statistics Netherlands, Anglo-Dutch Royal Dutch Shell and Unilever and other multinationals account for more than 2 million jobs, or about 40 percent of all employment, in the country of 17 million people.
Rutte said competition to attract multinational companies has become more fierce in light of Britain’s imminent departure from the European Union.
He argued scrapping the tax would make Dutch blue-chip shares more attractive to foreign investors, raising their valuations and hence making them less likely to be targeted for takeovers. He described failed attempts by U.S. companies to buy Unilever and paint maker Akzo Nobel AKZO.AS in the past year as "undesireable."
Describing the government as “just scared”, tax consultant Rudolph de Vries of Ernst & Young said it was worried that, having surrendured several corporate tax perks in the face of international criticism, the country would lose its allure as a European base and companies already located there could leave.
With Brexit in mind, Unilever is reviewing its dual corporate structure to see whether consolidating into either a single Dutch or British entity makes sense.
The company said of the Dutch dividend cut that it “welcomes measures that improve the business climate” in any country it operated in.
Shell, which openly lobbied for the cut, has said it will likely be able to scrap its dual share structure as a result, saving significantly on costs. [L8N1NF6M6]
DIVIDEND TAX BEHIND THE HYBRIDS
The dividend tax has been one of the main reasons both Shell and Unilever have maintained their unusual dual-nationality structure over the years.
In the Netherlands and most other countries, investors are able to offset the dividend tax withheld by the Dutch government against other taxes.
But because Britain, almost alone among developed nations, does not levy any dividend withholding tax, investors there are unable to reclaim the Dutch tax, so Shell and Unilever maintained a way to pay dividends directly to their British shareholders.
Unilever says a third of its shareholders are British.
The removal of the tax takes away one reason the firm might not choose the Netherlands as a headquarters if it decided to unify its structure.
Reporting by Toby Sterling; editing by John Stonestreet
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