Abandoned by Unilever, Dutch prime minister forced to reconsider tax plan

AMSTERDAM (Reuters) - Dutch Prime Minister Mark Rutte said his government would reconsider plans to scrap its dividend tax in a major political climbdown only hours after Unilever ULVR.L dropped plans to move its headquarters to the Netherlands.

FILE PHOTO: Dutch Prime Minister Mark Rutte attends a news conference after participating in the NATO Summit in Brussels, Belgium July 12, 2018. REUTERS/Paul Hanna/File Photo

Rutte, who had argued that getting rid of the 15 percent withholding tax on dividends was vital for the country’s business climate, said his government must reconsider its entire package of tax reforms.

“We didn’t decide to scrap the dividend tax for just one company, but the fact that such a large company that had decided to come to the Netherlands has withdrawn its plan is very relevant,” he told reporters in The Hague.

“That’s why we will reconsider our proposed measures,” added Rutte.

Rutte’s coalition holds a single-vote majority in both parliament and the senate. Despite some equivocation, no lawmaker has broken ranks over the issue.

Rutte, who leads the liberal VVD party, is heading his third government since coming to power in 2010.

Unilever, which along with fellow Anglo-Dutch company Royal Dutch Shell RDSa.AS has long lobbied against the tax, said earlier Friday it had suspended plans to consolidate a single headquarters in Rotterdam, Europe's largest port.

The company said it was bowing to pressure from shareholders at its British arm, who were worried about leaving the FTSE index, weaker Dutch rules on shareholder rights, and about the future tax treatment of Dutch dividends.

Rutte, who worked for Unilever from 1992-2002 before entering politics, had defended getting rid of the tax multiple times in front of a skeptical parliament.

He survived a no-confidence vote in April after lobbying memos of which he said he had no memory emerged.

One memo said Unilever considered the tax issue “decisive” in headquarter deliberations.

But political opponents successfully branded the dividend plan as a costly tax break for foreigners.

A poll published early last month said just 11 percent of Dutch voters supported getting rid of the tax.

In a debate last month, Rutte warned keeping the tax could lead to Shell and Unilever abandoning their Dutch headquarters -- and a loss of jobs.

“You could still opt to hold on to the tax, but there’s a large risk that these companies would then decide to leave,” he said.

Unilever CEO Paul Polman, a Dutchman, said the unexpectedly strong Dutch opposition to Rutte’s plan had indeed been “a factor” as it withdrew its plan to move to Rotterdam.

Reporting by Toby Sterling and Bart Meijer; Editing by Mark Heinrich and Keith Weir