The scandal caused by the discovery, in the midst of a pandemic, that the tax practices of the Netherlands deprive Italy and Spain each year of between 1,000 and 1,500 million euros in tax revenue, 10,000 million for the whole of the EU, added to the discontent with The practices of American multinationals in Europe caused a small but historic change in the climate of tolerance towards this reality in this country a couple of years ago, often sidelined in public debate with arguments such as the attractive business climate for doing business.
The issue crept into the last electoral campaign and the main political parties promised to clean up the country’s reputation. Pressure from international organizations increased and the European Commission included among the conditions for receiving funds from the post-covid Recovery and Resilience Plan the need to act against tax evasion. But, after more than two years, the balance is very mitigated.
Construction company Ferrovial’s plans to move to the Netherlands, where it is not active, indicates that “much remains to be done,” according to the Tax Justice Network. “Seeing more multinationals moving to take advantage of these tax conditions to the detriment of other EU states, Spain among them, suggests that the Dutch government is not committed to change. It confirms that a European action is needed”, defends its executive director, Alex Cobham.
The Hague, for its part, has put an end to the figure created two decades ago known as the Dutch sandwich and has closed the back door that, in combination with the double Irish technique, made it possible to avoid paying taxes by directing money to subsidiaries located in tax havens, a system used until 2020 by Google and other multinationals. The Government of Mark Rutte, a coalition of liberals and progressives, is proud of the progress and in June published that the flow of money leaving the Netherlands in the direction of “low tax jurisdictions” has fallen from 38,500 million euros in in 2019 to just 6,000 in 2021, the year in which these interests and royalties began to be taxed. The executive has promised to continue taking measures against tax avoidance, for example against mailbox companies.
But there are more lures and tax incentives still in place. According to Moran Hariri, an analyst at the aforementioned NGO, at this time the measure that could be most interesting for Ferrovial is the tax system for repatriated dividends from foreign subsidiaries, very relevant in the case of a company like the construction company, with business all over the world. While in Spain only 95% of dividends obtained abroad are exempt from tax, in the Netherlands they are 100% discounted, a real magnet for many foreign companies because each point of difference is worth millions.
According to an analysis by Banco Sabadell, Ferrovial can thus save around 40 million euros a year in taxes. The estimated figure is not very large in light of the annual turnover of the construction company, of more than 7,500 million euros per year; the bank itself estimates the cost of the transfer at around 20 million euros. Whether or not it is an attractive incentive, among the reasons given by Ferrovial to propose the transfer to its shareholders is not taxation, but “notoriety”, financial strength and “stability” and the best credit ratings “available in the country, rated with a AAA by investors, and a favorable environment for business.
With Brexit, dozens of companies left the United Kingdom to set up their headquarters in the Netherlands, with 140 moving in 2019 alone, almost half of the new arrivals registered that year. The number of multinationals present in the country is at record levels, more than 24,000 at the beginning of 2020. This favorable national context, however, has not prevented The Hague from seeing two of its largest companies, Unilever and Shell, leave for London and carry out their plans to grow in a more powerful financial environment. From there, the oil company has considered moving to the United States.
This situation is related to a problem that the president of the European Central Bank, Christine Lagarde, alluded to yesterday when asked about Ferrovial’s escape: the urgency of creating a union of European financial markets that puts an end to the current fragmentation and offers a attractive environment for European companies that want to grow. “Right now there is a fragmented market. We have one in Paris, another in Frankfurt, another in Madrid… Companies have to do many things to go public, speak many languages, deal with different banks, comply with different tax rules…”, Lagarde said in an interview on Antena3. “We are making progress but not as fast as we would like,” Lagarde admitted.
