Published in El Pais, 10 July 2021.
Being Dutch, I realize that my country is continually named as a tax haven or tax paradise. Depending on who makes the list, the place varies from being the first to at least the top ten. Countries around the world are worrying that they are losing revenue due to these tax havens. Apple, the Rolling Stones, the U2 band and others take advantage of the very beneficial laws of the Netherlands and register their company here. Many people think that what they do is illegal, but it is not. There are two concepts that must be taken into account, evade and avoid taxes. The avoidance is to use the laws in favor to avoid paying so much tax and this is completely legal, while evading taxes is illegal.
Just in case if you think about migrating to the Netherlands for tax reasons, it is not so attractive. On average a person pays between 23% and 36% taxes on monthly income and additionally, one pays ridiculous annual capital taxes between 0.6% and 1.8%.
I think nobody likes to pay taxes. I do not think that someone is jumping every month of happiness when he sees that we pay so much of our income to the State. So we can’t blame companies for looking for ways to avoid taxes. What is a problem is that the distribution of taxes is not equal. Corporate tax rates range from 0% to 35% and dividend rates from 0% to 51% between countries. Governments lower them to be more attractive to foreign investment and bring in more companies that bring more jobs to the economy. This is good for reducing unemployment. But in this way they “take” income from other countries due to the migration of their companies.
In a way, if companies lower their taxes, they generally offer their products at lower prices for the consumer. However, the problem is that not all companies can use these options to avoid taxes. Small businesses just don’t have the knowledge or the resources to do it. This results in business competitiveness being skewed to a great disadvantage for SMEs. The road to harmonization of tax rates in the European Union and the world is long. Fortunately, a few weeks ago almost 130 countries indicated their support for the plan to define how much and where companies have to pay their taxes. So, hopefully soon the rules will be clearer for everyone. Thus, the challenge will be to become the most attractive country for foreign investment with its own characteristics, not only due to taxes.