The Dutch Government has unveiled plans to improve tax transparency and to fight against international tax avoidance, specifically by updating tax treaties with low- and middle-income countries.
The government has planned to revise existing tax treaties with Zambia and with 22 other developing countries, to incorporate the anti-abuse clauses where needed, ensuring that developing countries recover due taxes, vital for infrastructure and education, according to Dutch Foreign Trade Minister Ploumen and State Secretary for Finance Weekers.
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The Netherlands has tax treaties with over 90 countries, of which the tax accord with Zambia, dating from 1977, is outdated, and most of them do not have anti-abuse clauses.
The Government aims to implement a series of concrete general measures to clampdown on international tax avoidance, reported Global Tax News.
Netherlands will ensure that the substantial activity requirements apply to more companies and intends to inform its treaty partners spontaneously when, in retrospect, a company turns out not to meet the substantial activity requirements.
According to the new rules, Information exchange will also apply to specific financing firms that have received advance certainty. Also, the Tax Administration will only process requests for a tax ruling from holding companies if the group in which they operate has sufficient ties with the Netherlands.
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By GlobalDataGlobal Tax News reported that Netherlands plans to expand the technical assistance it provides to developing countries to strengthen tax administrations, thereby improving tax collection, reducing the number of unnecessary tax exemptions, and combating tax evasion and avoidance.
Ploumen said: "By making use of loopholes in tax treaties in combination with differences between national tax rules, internationally operating companies can avoid paying tax. It means that poor countries miss out on tax revenues, funds they clearly need for matters such as infrastructure and education."
State Secretary for Finance Weekers said: "The Dutch Government favours a worldwide tightening of the rules and greater transparency through consultations in the OECD, G20 and the EU. Measures taken by the Netherlands on its own cannot prevent companies from using a different route; they merely shift the problem. And so we will focus our efforts on improving transparency."
