On 28 March 2022, I spoke at a Hearing of the European Parliament FISC Committee on tax matters. The subject was the ongoing fight against aggressive tax structures (ATS) and the problematic role of the Netherlands. A sensitive topic.
In recent years, the European Parliament (EP) has done a considerable amount of work in the area of the prevention of tax avoidance, base erosion, and ATS. A major issue in this regard was that of the Dutch letterbox companies. In 2019, the EP famously branded the Netherlands a tax haven. Three years down the line, there is evidence that this Member State is changing its ways: there have been multiple reforms and a cultural shift within the tax sector.
In my contribution, I call for a greater emphasis on ethics within the tax sector as a way of combatting aggressive tax structures. Given that it is impossible to design a perfect tax system, convincing tax professionals not to seek loopholes and clever dodges, is very important. And yes, it’s easy to be cynical. Socially responsible tax, transparency, Social Development Goals and the like, are currently hot topics for multinationals (and their advisors). But for how long? Never trust a poacher-turned-gamekeeper. This is precisely why solidifying fiscal ethics in the hearts and minds of tax professionals is so important.
BEPS under pressure
Against the backdrop of a Russia-caused recession, the war in Ukraine, and a host of social problems (e.g. a housing crisis, the climate emergency, environmental issues), Cash may soon be King again, as it was in the 2008-global crisis. Back then, governments across the world introduced tax breaks and tax planning options as a way of keeping businesses afloat. How would this sit with the progress achieved under BEPS and its spin-offs? To make matters worse, two years of COVID measures may well have done more structural harm to the EU economies than is currently visible. A cascade of generous State aid packages, which provided short-term solutions but are clearly not sustainable, may well be masking a precarious economic reality.
Ethical resolve will be tested
My overarching point is that the newly found ethical resolve in tax matters will soon be tested. How important is the fight against tax avoidance, when the going gets tough? Will the Netherlands revert to the old doctrine of the primacy of the ‘investment climate’ to attract foreign investments? Or will it stick to its present course, benefitting other (EU) source countries but potentially sacrificing Dutch jobs? Time will tell.