Netherlands to review ‘controversial’ tax treaties with Ghana, others

EuroThe Netherlands has developed a new proposal that seeks to review its tax treaties with Ghana and about 23 other least-developed countries. The Dutch has over the years been accused of aiding tax avoidance by multinational corporations as they reroute their profits through Dutch “letterbox companies” that do no real business in the Netherlands and exist largely for tax purposes.

To address the criticism, Netherlands’ Deputy Finance Minister, Frans Weekers in an interview with the UK Financial Times (FT) last week admitted the controversy over the letterbox companies had damaged the Netherlands’ investment climate.

According to Mr Weekers, the government’s new proposal will address such criticisms.

“Over the past 10 years the trend has been for the number of letterbox companies in the Netherlands to keep growing. I want to turn that trend around. I see the Netherlands being portrayed in a bad light. I don’t want to be portrayed in a bad light,” Mr Weekers told the FT.

The FT report indicated that after Ghana signed a tax treaty with the Netherlands in 2007, Dutch investment grew a hundredfold within three years, making the Netherlands the country’s largest source of foreign direct investment.

The new initiative came to light at the just-ended G20 meeting in St. Petersburg, Russia which had tax harmonisation issues high on the agenda.

As part of the proposed tax treaties, the UK publication reports that the Dutch plans to insert new anti-fraud provisions in the tax treaties with the 23 least-developed countries including Ghana; pass on information to tax inspectors in least-developed countries when multinationals request a so-called “tax ruling” in the Netherlands; and crack down on letterbox companies by forcing even companies that have not asked for tax rulings to meet the country’s “substance demands”.

The Dutch government has reportedly said that developing countries loses approximately  €150 million yearly due to the misuse of Dutch tax treaties.

By Ekow Quandzie

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