The Netherlands playing a smaller role in global tax evasion than in the past

The Netherlands is playing a smaller role in international tax evasion, an analysis from the Dutch Central Bank (DNB) showed. The flow of money that enters our country and immediately leaves on its way to tax havens has been much smaller since 2020 than in previous years, the central bank noted.

Thanks to the many tax treaties with other countries, it was attractive for multinationals to channel profits through Dutch letterbox companies to countries with very favorable tax regimes. For example, profits from dividends, interest payments, or royalties that go to countries such as Bermuda or the Cayman Islands.

This money stream from the Netherlands to these types of “low taxing jurisdictions” was an average of 37 billion euros between 2017 and the end of 2019. That number dropped to five billion euros in 2020 and in the years following this, it fluctuated between ten and seven billion euros.

DNB pointed out that the total flow of investments in the Netherlands that flow on to other countries has not decreased. In 2022 and 2023 it was around 324 billion euros. In 2019, this amounted to 283 billion euros. According to DNB, companies that were founded in the Netherlands for the flow of profits continue to play a major role.

The Netherlands was often criticized internationally because the country was allegedly a hub for global tax evasion which led to governments of developing countries missing out on a lot of income.

Some countries, such as Uganda, were not able to levy certain taxes at all due to the role of the Netherlands, the Netherlands Bureau for Economic Policy Analysis wrote a few years ago.

DNB mentioned a few actions that possibly helped combat this practice. For example, new withholding taxes came into effect in 2021, which the Netherlands levies directly on companies established here that transfer interest and royalty payments to sister companies in tax havens.

Another factor was an agreement of almost 140 countries, the Netherlands included, to tax a maximum of 15 percent of the profits made by large multinationals. These agreements are meant to prevent countries from competing to try and bring international companies to their nation by offering continuously lower tax fees.