The Netherlands’ extensive tax treaty network with other countries leads to huge revenue losses in developing countries, according to a new report by multinational research institute Somo.

Somo research shows ‘28 countries together lose €771m on dividend and interest tax income alone every year,’ because of Dutch tax treaties. But the total amount will be far higher because the calculations do not include tax avoidance through profit shifting with the use of royalties and capital gains.

‘This report shows that Dutch tax treaties have a seriously negative impact on poor countries’ revenue and that there is no evidence these tax losses are compensated by an increase in investment as a result of having tax deals,’ said Somo researcher Katrin McGauran.

Shell firms

In particular, Eastern European countries such as Serbia, Ukraine and Croatia have very disadvantageous treaty provisions, the report states.

In late 2012, Mongolia cancelled its tax agreements with the Netherlands and other countries because of the loss of revenue.

Meanwhile, the Financieele Dagblad reports that the Netherlands earns over €3bn a year from its shell company regime. 

Turnover

The claim was made by economist Barbara Baarsma from the SEO research organisation on television current affairs show Nieuwsuur on Monday evening. The €3bn comes from tax income and the turnover generated by financial service companies.

The report, commissioned by the Holland Financial Centre organisation, will be published later on Tuesday.

The SEO report states the Netherlands has some 12,000 multinational holding companies, of which 75% are based at trust offices. These holding companies generate between 8,800 and 13,000 jobs – or around one job per company.

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More tax levied over tax haven income
Multinationals and French state companies use Dutch tax deals
Tax deals for letter box firms under fire, MPs demand change
Starbucks under fire in Britain over Dutch tax deal
EU wants an end to letterbox companies
Letterbox companies largely exempt from tougher rules
The Netherlands is a popular tax haven for FTSE 100 firms
Holland no longer a US tax haven
More tax levied over tax haven income