Dutch multinationals will be forced to pay profit tax in Netherlands: Report

Multinational companies which conduct business in the Netherlands will soon be forced to pay taxes on their profits, instead of creatively using an accounting loophole to avoid tax liabilities in the country. The ruling Dutch cabinet, led by third-term Prime Minister Mark Rutte, has reportedly agreed to back an initiative from the left wing opposition parties, according to broadcaster NOS and newspaper AD, both citing unnamed sources.

The new rules, which could be implemented as early as 2021, would prevent multinational firms from deducting foreign losses in the Netherlands as a way to pay little or no tax there. NOS said it could mean that Shell would have to pay roughly 250 million euros in taxes, with Philips and Akzo Nobel forced to pay tens of millions of euros.

The three firms pay no income tax, or next to nothing, in the Netherlands, the broadcaster noted. Earlier this year, Philps and Akzo Nobel pledged to pay more taxes in the Netherlands.

Opposition party GroenLinks (Greens) first announced the legislative proposal in April, with support from left-wing parties PvdA (Labour), and SP (Socialists). Eliminating the corporate tax deduction would likely force a company like Shell to pay profit tax in the country.

"Great news," said GroenLinks leader Jesse Klaver on social media. "The one who perseveres, wins."

Shell ultimately admitted in May that it paid no taxes on billions of euros in profits in recent years, after previously saying that the allegation was unfounded. The company managed to file a loss with the tax authorities, despite the Dutch office of the fossil fuel conglomerate profiting over a billion euros both in 2016 and 2017.

At the time, Shell Netherlands director Marjan van Loon told Elsevier that the company paid 4.5 billion euros in VAT, excise, and wage taxes those years. "Shell is good for thousands of direct and indirect jobs in the Netherlands, and for 3 billion in spending with Dutch suppliers", she said, praising the tax-friendly country.

Shell reportedly lobbied the government to scrap the tax on dividends, and instead reduce the tax on corporate profits from 25 to 20 percent. In the end, the government did just that, a move which would benefit Netherlands-based Shell shareholders, while the company could continue to pay no corporate profit tax.

Back in April, GroenLinks MP Bart Snels was confident the left-wing proposal would pass through Parliament. "People no longer accept this," he said, adding that he hoped to get support from governing coalition parties D66 and ChristenUnie on the bill. Snels leads the party's portfolio of financial issues.

"If you disagree, it's up to you to change the law. You represent Dutch people," the company's leader in tax remittance, Alan McLean, said to the magazine. "But if you change the law, be honest with people about the consequences," he added.

Revenue generated by the new law could offset other tax reductions, particularly for small and mid-sized businesses, sources told NOS. The proposal was discussed at the weekly Cabinet meeting last Friday at length, reported AD.