Reduction in tax avoidance via the Netherlands thanks to new measures
The measures that the Netherlands is taking to combat tax avoidance are producing good results. A recent set of measures, the effects of which have been assessed for the first time, are proving effective at helping to reduce tax avoidance. For example, one measure has resulted in a €5 billion drop in the amount of profits shifted by businesses to affiliated companies. The practice of deferring tax by means of hybrid “CV/BV structures” has also been tackled effectively.
Tjebbe van Oostenbruggen, minister for Tax Affairs and the Tax Administration, commented: "It's good news that the new measures against tax avoidance are getting results. Tax avoidance undermines taxpayer compliance and harms the Netherlands’ reputation. International measures have proven to be the most effective, and we’ll continue to advocate for them in the years ahead."
In recent years measures against tax avoidance have been taken at both national and international level. Each year the government assesses the impact of these measures. This year, for the first time, the impact of a number of recent measures was assessed.
One such measure is the earnings stripping rule introduced by the first Anti-Tax Avoidance Directive (ATAD 1), which has resulted in businesses moving less profit via interest payments to affiliated companies. It has therefore proved effective at preventing tax avoidance. The reduction in interest payments is estimated at €5 billion.
The second Anti-Tax Avoidance Directive (ATAD 2) also seems to be effective. It prevents companies exploiting differences between the tax rules in different countries to avoid taxation. For instance, it addresses the ‘CV/BV’ structure, which enabled companies to defer tax on profits generated outside their home country for a lengthy period. Data shows that US companies are booking less commercial profit in the Netherlands, which indicates that they have abandoned the CV/BV structure.
Updated figures from De Nederlandsche Bank (the Dutch central bank) show a persistent fall since 2019 in outflows of interest, royalties and dividends from the Netherlands to low-tax countries. This flow of money has fallen from €37 billion in 2019 to almost €7 billion in 2023.
It has not yet been possible to fully gauge the effects of all the measures that have been taken, such as the withholding tax on dividends paid to low-tax countries and the measures that tackle mismatches in the application of the arm’s length principle. The government will therefore continue to annually assess the effects of tax avoidance measures.
European and international developments
At European level, action to tackle tax avoidance is continuing. This includes the FASTER directive, which enables EU member states to reject withholding tax refund requests where there is a risk of tax abuse. In addition, the system for automatically exchanging information for tax purposes – under the Directive on administrative cooperation in the field of taxation (DAC) – is being further expanded to include, for example, cryptocurrencies.
Within the OECD/G20 Inclusive Framework, the Netherlands has worked with a large number of countries to reform the international tax system. This has resulted in the introduction of the Minimum Tax Rate Act 2024. The Netherlands remains committed to the introduction of another component of the agreement reached under the Inclusive Framework, namely allocating more taxing rights over the profits of multinationals to countries in which consumers and users are located.