Inside Reindert Dooves’s home, a 17th- century, three-story converted warehouse along the Zaan canal in suburban Amsterdam, a 21st-century Internet giant is avoiding taxes.
The bookkeeper’s
home office doubles as the headquarters for a
Yahoo! Inc. (YHOO) offshore unit. Through this sun-filled, white- walled room, Yahoo has taken advantage of the law to quietly funnel hundreds of millions of dollars in global profits to island subsidiaries, cutting its worldwide tax bill.
The Yahoo arrangement illustrates that the
Netherlands, in the heart of a continent better known for social welfare than corporate welfare, has emerged as one of the most important tax havens for multinational companies. Now, as a deficit-strapped Europe raises retirement ages and taxes on the working class, the Netherlands’ role as a $13 trillion relay station on the global tax-avoiding network is prompting a backlash.
The Dutch Parliament is scheduled to debate the fairness of its tax system today. Lawmakers from several parties, including members of the country’s governing coalition, say they want to remove a stain on the nation’s reputation.
“We should not be a tax haven,” said
Ed Groot, a parliament member from the
Labour Party, which along with the
People’s Party for Freedom and Democracy took power in November. Both ruling parties are “fed up with these so called PO Box companies,” he said. “If they go somewhere else we are not sorry at all because they spoil the name of Holland. Otherwise you can wait for retaliation measures and this we don’t want ".
Last month, the European Commission, the European Union’s executive body, declared a war on tax avoidance and evasion, which it said costs the EU 1 trillion euros a year. The commission advised member states -- including the Netherlands -- to create tax-haven blacklists and adopt anti-abuse rules.
It also recommended reforms that could undermine the lure of the Netherlands, and hurt a spinoff industry that has mushroomed in and around Amsterdam to abet tax avoidance.
Attracted by the Netherlands’ lenient policies and extensive network of tax treaties, companies such as Yahoo,
Google Inc. (GOOG), Merck & Co. and Dell Inc. have moved profits through the country. Using techniques with nicknames such as the “Dutch Sandwich,” multinational companies routed 10.2 trillion euros in 2010 through 14,300 Dutch “special financial units,” according to the Dutch Central Bank. Such units often only exist on paper, as is allowed by law.
Profit shifting into tax havens by corporations costs the U.S. $90 billion a year, according to
Kimberly Clausing, an economics professor at
Reed College in Portland, Oregon. The U.S. faces a projected budget deficit of almost $1 trillion in fiscal 2013.
The Paris-based Organization for Economic Cooperation and Development -- which sets standards for how multinational companies allocate taxable income around the world -- is also tackling the issue. It’s discussing a proposal that could make it harder for companies to move profits through the Netherlands into island tax havens.
Read more: Yahoo, Dell Swell Netherlands’ $13 Trillion Tax Haven - Bloomberg
