AMSTERDAM (Reuters) - The Dutch Finance Ministry said on Monday a review of tax deals offered to international companies found 72 mistakes, including five cases in which decisions were either wrong or likely wrong, and tax policies should be revised “in some ways”.
The Dutch government is carrying out modest reforms to its tax policies, which contain provisions seen as lax by critics but as necessary by The Hague to attract foreign business.
The policies include so-called advance rulings, which can include arrangements wherein a tax authority approves in advance prices one branch of a company charges another when they do business. Multinationals value the certainty advance tax rulings bring, while critics say they are often used to shift profits into zero tax jurisdictions.
Tax campaigners say that the Netherlands and Luxembourg specifically rubber-stamp such deals in order to attract investment and jobs. In addition, such deals are also often not available to smaller or less sophisticated firms.
“The results of this review...give cause to revise in some ways giving advance rulings,” Deputy Finance Minister Menno Snel said in a letter to Parliament.
“However, the Cabinet remains a steadfast advocate for giving clarity to taxpayers at an early stage.”
The ministry began reviewing all deals offered to international companies in the 2012-2016 period in November, after being stung by a leak that showed it failed to follow its own vetting procedures in a 2008 case involving Procter & Gamble (PG.N), though it said that deal did not contain errors of substance.
The review found that in six out of 3,101 instances, the country’s specialized team for international tax rulings failed to have two agents sign off on a deal as required. None of those deals were found to have substantial errors.
In another 1,361 advance rulings that were made by regular agents, 63 should have been turned over to the specialized team but were not.
A random sample of the rulings made by non-specialized agents uncovered nine additional cases that failed to meet other criteria for advance rulings.
After reviewing 72 problematic cases more thoroughly, the ministry concluded that in five, the “substance” of the ruling was wrong or probably wrong.
The ministry did not reveal details or the names of the companies involved.
In 2015, the European Commission said the Netherlands had given Starbucks an unreasonably generous advance ruling and ordered The Hague to recoup 30 million euros ($35 million) in back taxes. The government is contesting that order.
Snel said he would look at new measures to comply “with European guidelines and further guarantee the quality” of its advance rulings.
Granting advance rulings to multinationals “is not open to discussion for the Cabinet,” Snel said.
“What is open to question, given the Cabinet’s intention to counter ‘mailbox company’ constructions, is whether assurance should be given in advance to companies that deliver a limited contribution to the real economy.”
He said he would try to have changes implemented by next year.
Reporting by Toby Sterling; Editing by Tom Hogue, William Maclean