The Dutch tax system is attractive to foreign firms and is similar in regulation to Britain, Switzerland and Luxemburg, the national audit office said in a report published on Thursday.

This tax system, based on treaties which exempt multinationals from tax on profits made abroad and on royalties, conforms to international rules and the tax office exercises sufficient controls, the audit office said.

But at the same time, the system does mean the Netherlands is used by companies to avoid taxation, the audit office said. In addition, parliament does not have a good overview of the Dutch investment climate in terms of foreign firms and tax avoidance.

Records

The Dutch tax office does not keep records of the impact of dividend tax exemptions which have been granted on the basis of bilateral tax treaties.

‘There is very little clear information available about the results of this policy and the money channels which go with it,’ the report said. It also pointed out that countries compete with each other to attract multinationals, which is pressuring taxes on profits and impacting on both governments and developing countries.

The Netherlands has drawn up tax treaties with 94 different countries. The audit office said the finance ministry should provide a detailed picture to parliament every year of the way the investment climate is being used and the financial implications.