The Netherlands is not a tax paradise, junior finance minister Frans Weekers said on Tuesday following the publication of two reports on Dutch tax treaties.

A report for Holland Financial Centre by economic institute SEO said that €278bn flow through shell companies based in the Netherlands every year.

This stems from the tax break on participations, relatively low tax on interest and royalties and the wide tax treaty network with other countries, the SEO report said.

Advance agreements

The SEO said it is notable that companies are given surety on how much tax they have to pay before setting up shop in the Netherlands.

‘It is up to… parliament to decide if we are a tax haven because of this,’ researcher Barbara Baarsma is quoted as saying by website nu.nl. ‘But it is a lot of money.’

This is not the case, Weekers said in a reaction to website nu.nl

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.

Developing countries

Another report on Tuesday said the Netherlands’ extensive tax treaty network with other countries leads to huge revenue losses in developing countries.

Research by multinational research institute Somo 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.

Negative impact

‘This report shows 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.

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.