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Shell’s dubious tax arrangements

Printed below is an English translation of an article published today by the Dutch Financial Times, Financieele Dagblad


Shell avoids the dividend tax via a tax haven, which would have cost the Dutch treasury – and therefore the taxpayer – at least € 7 billion… The intervention of a ‘trust’ on channel island of Jersey seems to underline the dubious character of the ‘deal’.

Pressing Rutte to exchange dividend tax increases

Ulko Jonker • Economics & Politics

The coalition saw the storm on Saturday morning early. Shortly after Jesse Klaver of GroenLinks repeated his call for a parliamentary inquiry into the ‘cesspool’ around the dividend tax, the parliamentary questions of the financial spokespersons of VVD, CDA, D66 and ChristenUnie were already under State Secretary Menno Snel van Financiën.

Reason: the disclosure by Trouw that Shell avoids the dividend tax via a tax haven, which would have cost the Dutch treasury – and therefore the taxpayer – at least € 7 billion. They want to clarify this week about ‘the complete ruling policy on the dividend tax of the past 15 years’. How much were they, what was the nature, content and period of validity? And has all rulings checked whether they comply with the laws and regulations?

No secrecy

The name Shell as such is missing in the questions. Quick can not therefore hide behind the duty of confidentiality laid down in Article 67 of the Tax Code. In 2005, the oil company made agreements with the tax authorities to facilitate the merger between the Dutch ‘Royal’ and the British Shell Transport into one Royal Dutch Shell.

The existence of the structure has been public since the merger: its operation is also extensively described in the annual report. Holders of ‘B’ shares, the former Shell Transport, will receive their dividend, as before, without tax from the Dutch tax authorities. The intervention of a ‘trust’ on channel island of Jersey seems to underline the dubious character of the ‘deal’.

‘Shell cannot be blamed’

But that is not the case with Shell, says UvA Professor of Tax Law Jan van de Streek. ‘Shell itself cannot be counted in this.’ Van de Streek describes the construction this week extensively in the Weekly Fiscal Law. ‘A company must be able to rely on the Dutch government. And it has to issue a ruling based on the tax laws and regulations’, according to the professor.

Van de Streek does question the lawfulness of the approach of the tax authorities. Royal Dutch Shell has been established for tax purposes in the Netherlands since 2005. The construction, in which the dividend is formally paid by British subsidiaries, is according to him in violation of Dutch law.

New light

Who is right, cannot be judged as long as the details of the agreements are not known. ‘Shell can shed a new light on this by providing further facts’, says Van de Streek. He himself cannot think of it. According to him, all dividends are attributable to the Dutch head office from a fiscal point of view. He also has ‘serious doubts’ as to whether the conditions are met for the only exception that the dividend on the B shares can be regarded as ‘untaxed capital refunds’.

It is fun for tax specialists and lawyers. But the existence of the Shell ruling is red meat for the opposition in the political arena. The well-known defense from Finance that a ruling is no different than an explanation in advance of how the legislation and regulations would also be applied afterwards can not be independently tested as long as it is secret.

Dark deals

The abolition of the dividend tax can therefore linger in the face of dark ‘deals’ through tax havens and ‘favoritism’. This is a headache dossier for the coalition.

Mark Rutte continues to defend it, he told party members last month. ‘If we only take measures that are immediately popular, then we lose the right to govern’. But his three coalition partners would not be sorry if he came to repentance. Even party colleague Frank de Grave already announced in the Senate last year that he would be open to alternatives, provided that the money continues to benefit the business community. There is another way out.


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