Taxation and development
This week The Economist features a great article on corporate taxation, explaining in detail why the OECD’s plan to curb multinationals’tax avoidance is a missed opportunity.
In a second article, it looks at recent changes in some key countries: Luxembourg, the Netherlands, and the UK. It rightly notes that in many ways, the UK is leading the race to the bottom in corporate tax.
What about the Netherlands? Well, I argue that there is some window-dressing going on. The Netherlands says it is strengthening requirements that companies have a real economic presence here, but it is still too easy to fulfil these by hiring local firms to provide the necessary substance.
Take the requirement that at least half of all directors of a company must be Dutch residents and have the necessary skills and qualifications, for example. What many people don’t know is that Dutch law allows companies to be directors of other companies. So sometimes you get the ridiculous situation that a mailbox company meets the criterion of having Dutch directors by appointing other Dutch mailbox companies, or Dutch trust companies, as directors. (Never mind about their skills and qualifications.)
If the Netherlands is really serious about economic substance, it should end such artificial arrangements that serve no real business purpose whatsoever. Require that all directors must be natural persons! Who could possibly be against that?