Paradise Papers: Dutch tax inspector allows U.S. multinational to evade $169 mil. in taxes
Update, 3:40 p.m., 7 November 2017: A previous version of this article misidentified the university where Professor Jan van de Streek works. He is a professor at the University of Amsterdam.
A Dutch tax inspector gave United States multinational Procter & Gamble permission to move 676 million dollars to the Cayman Islands untaxed, Trouw reported on Tuesday based on its own investigation into the so-called Paradise Papers. As a result, the Dutch treasury missed out on 169 million dollars, or over 145 million euros, in taxes, according to the newspaper.
The Paradise Papers is the collective name for 13.4 million documents and emails about tax havens. The data was leaked to German newspaper Süddeutsche Zeitung, who shared it with global media through international journalist collective ICIJ.
According to Trouw, this decision, or so-called ruling, was made by a local inspector at the Rotterdam office of the Tax Authority in 2008. The inspector seems to have made the decision by himself, without consulting anyone else. According to the Tax Authority's rules, rulings involving such high amounts must first be submitted to a special team of ruling specialists. The Tax Authority acknowledged to Trouw that this ruling did not comply to the Authority's own rules. The spokesperson could not explain why or how this happened, and did not know whether local inspectors violated the rules in other arrangements with multinationals.
Trouw has the document showing the arrangement with Procter & Gamble (P&G) in its possession. The American multinational is one of the largest suppliers of household and healthcare products in the world. In the Netherlands the company is known for brands like Oral-B, Always, Pampers and Gilette.
Over the past few years, such Tax Authority rulings were frequently subject to criticism, especially after the revelations of the Panama Papers and so-called sweetheart tax deals with multinationals like Starbucks. The Tax Authority doesn't reveal the content of such agreements, which means that the Tweede Kamer - the lower house of Dutch parliament - can't check the agreements. Despite the criticism, several State Secretaries did not scrap the rulings, as they make it more attractive for foreign companies to settle in the Netherlands, according to NU.nl.
These rulings must, however, comply to strict conditions. Former State Secretary Eric Wiebes of Finance sent a standard format of such rulings to the Tweede Kamer earlier this year as an example. It showed that rulings are subject to requirements like a description of the company's global structure, a signature of a second inspector and a list of conditions the company must comply with to keep the agreement from being annulled.
Trouw showed the agreement with P&G to Jan van de Streek, professor of Tax Law at University of Amsterdam. According to him, it looks nothing like the example ruling Wiebes sent to the Tweede Kamer. This agreement consists only of a two-page letter written on PricewaterhouseCoopers stationary, which refers only to a telephone conversation with the Rotterdam inspector. There is no sign of the other required data, the list of conditions or the signature of a second inspector.