The Hague, (AFP/APP):Dutch officials are opening an investigation into thousands of agreements with foreign businesses after claims two US multinationals managed to save millions in taxes, the government said Wednesday.
The move comes after the Dutch newspaper, Trouw, Tuesday uncovered “a secret deal” for the US giant Procter & Gamble which allowed it to move huge sums to the Cayman Islands tax haven, shaving 145 million euros off its Dutch tax bill. Another report in French newspaper Le Monde said sportswear giant Nike used a Dutch loophole in 2014 to reduce its tax on profits to two percent down from the 25 percent average for European companies.
The revelations were among the 13.4 million leaked documents known as the “Paradise Papers” which have sparked a new outcry about tax avoidance by multinationals and the world’s super rich.
According to Trouw, one tax official in Rotterdam, where Procter & Gamble have offices, agreed in 2008 that the company could move some $676 million offshore to the Caymans enabling the US giant “to save some $169 million in taxes in The Netherlands.” Normally, transactions involving such large sums should be examined by a team of tax specialists before an agreement is made. “It is not acceptable that the proper procedures were not followed,” said deputy finance minister Menno Snel in a letter to parliament.
“That’s why I have ordered an inquiry into a further 4,000 cross-border agreements to ensure that they conform to the right procedures,” he added. The results of the inquiry will be made available to the Dutch lower house at the beginning of the year. The government of Prime Minister Mark Rutte intends “to end the situation” which leads companies to “set up in the Netherlands on paper only in order to get away with not paying millions in taxes,” Snel added in his letter. Procter & Gamble, however, have denounced what it called “false” information about its fiscal practices.
“Any media reports that claim P&G is avoiding tax are false,” it said in a statement late Tuesday. “P&G pays all the taxes we owe, worldwide, and we comply with the letter and spirit of the law everywhere we operate,” the company added. Nike also has said that it acted legally. The scandal has, however, prompted calls for the Dutch parliament to tighten laws on tax evasion. Trouw is part of the US-based International Consortium of Investigative Journalists (ICIJ) which released the trove of documents detailing secretive offshore deals that, while not illegal, are embarrassing for those concerned.