EU Takes Aim at Netherlands and Other Tax Havens in Europe

A Starbucks in downtown Amsterdam. A tax deal between the Dutch government and the coffee shop company has come under scrutiny. (Credit: Herman Wouters for The New York Times)
A Starbucks in downtown Amsterdam. A tax deal between the Dutch government and the coffee shop company has come under scrutiny. (Credit: Herman Wouters for The New York Times)

American companies have plowed more money into the Netherlands than any other country in the world — for five years running.

This does not reflect a new fascination with pot or pancakes. It is about the taxes, or lack of them.

The laws in Netherlands shield a variety of profits from taxation, making it attractive for big multinational companies like Starbucks, Google and IBM to set up offices. Even rock stars like the Rolling Stones and U2 have taken advantage of Dutch tax shelters.

The same goes for Luxembourg, Bermuda, Ireland and the British Caribbean countries like the Cayman Islands. Along with the Netherlands, those places rank among the top destinations for foreign direct investment from the United States, according to a review of data collected by the Bureau of Economic Analysis that shows how entrenched tax avoidance strategies have become.

Global authorities are now aiming to close the loopholes that have let such locales flourish and have allowed multinational corporations to legally avoid paying billions of dollars in taxes. On Friday, European Union authorities publicly accused the Netherlands of making a special deal with Starbucks that helped the coffee company lower its taxes, seeing it as potentially illegal state aid.

It is the latest case to focus on favorable and often secretive tax arrangements between big multinationals and tax authorities — deals struck between Apple and Ireland, and Amazon and Fiat with Luxembourg. European authorities have also asked countries about arrangements made with a number of other companies, including Microsoft.

But regulators, if they even make a truly determined effort, face an uphill battle in changing the system.

Companies, for one, are doing their best to minimize the fallout.

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