The Netherlands has become known as one of the most
adamant critics of Greece during the last five years. Dutch politicians from
both sides of the political spectrum were always ready to condemn Greece ‘and its irresponsible
fiscal behaviour’ during the last fifteen years.
“The country should have never
been allowed into the Euro-zone” is an often heard and seldomly countered opinion,
here in the low countries. Only very few Dutch politicians showed some empathy and
understanding for the
very awkward situation of Greece currently.
The country has a few massive hurdles to take, before it can be
considered as a normal – hence: more Northern European – country with a bright
and prosperous future before it. The main problems are:
- Its massive tax avoidance – or should it be called tax evasion(?!))
- Its aging population;
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| Greece's total population and birth vs mortality figures Chart by: Ernst's Economy Data courtesy of: en.wikipedia.org Click to enlarge |
- Its excess amounts of civil servants, who owed their job in the past to somebody with influence and ‘friends in high places’;
- Its widespread corruption and clientelism;
- Its faltering economy, mainly based upon tourism, agriculture and distribution.
Summarized: there are factors – like the tax avoidance,
the corruption and clientelism, as well as the oversized civil service
apparatus – for which the Greek politicians and citizens are both equally
responsible. Of course it is not unjustified and unfair, when the Northern
European people and countries complain about that.
A harder nut to crack, however, is the unfavourable
Greek demographics, in which the aging population and growing number of retired inhabitants is demanding an
ever bigger slice of the economic pie, without yielding any of the economic
output, which is necessary to pay for this pie. Looking at that, the mass immigration in Greece can
almost be considered a blessing in disguise, as it adds some badly needed extra
hands to the (future) Greek economy.
Also the lagging Greek industry and services economy
are things, for which the Greeks could dearly use “a little help
from their friends”, but receive too little of it.
And one of the main factors in Greece, for which the
Dutch can also be considered straight away responsible (i.e. as perpetrators
and not just as “innocent” bystanders), is the aforementioned tax avoidance. Although the Dutch government and politicians frantically
deny this, the evidence is mounting that The Netherlands is indeed a genuine tax haven
and a paradise for letter box firms.
One of the institutions that adds to the stockpile of
unfavourable evidence is the Centre for Research on Multinational Companies
(SOMO), which published two articles this week, on the Dutch government
enabling the tax avoidance (evasion) by Greek companies. Here are the pertinent
snippets of these two articles:
A
new SOMO report reveals that while Greece endures harsh austerity measures
imposed by the European Commission, European Central Bank and IMF and supported
by the Netherlands, Greece’s economic recovery is being undermined by
large-scale tax avoidance – enabled by the Netherlands.
The
report, Fool’s Gold, reveals that tax avoidance by Canadian mining company
Eldorado Gold, which uses letter-box companies in the Netherlands, has led to
tax losses of at least €1.7 million for Greece in the past two years.
Eldorado
Gold uses Dutch letter-box companies to avoid paying taxes while having no
material operations in the Netherlands. Fool’s Gold has found that Eldorado
Gold has a loan-financing structure that shifts interest payments from Greek
subsidiary Hellas Gold SA, via Dutch letter-box companies to a Barbados entity
where this income remains untaxed. If this financing structure persists, future
profits from the project and related income tax can be expected to be
substantially reduced, especially if practised in combination with other tax
avoidance techniques widely used by extractive sector firms.
The
case of Eldorado Gold is not an isolated one – rather, the Netherlands and
Luxembourg are widely used tax conduit countries for foreign companies
investing in Greece. The report shows that a staggering 80 per cent of direct
investments from the Netherlands to Greece are routed through letter-box
companies – an underreported issue in discussions on the causes of Greece’s
budget deficit.
SOMO
researcher Indra Römgens: “Tax abuse by large corporations operating in Greece
and the facilitating role that EU law and Member States’ fiscal regimes play
therein should be closely scrutinised by the new European Parliament's special
committee on tax rulings.”
It's up to Greece to tackle its own problems with tax avoidance.
This is what the Dutch government had to say in its response to the Fool's Gold
report which was released on Monday.
The
government's reaction leaves no doubt that the Dutch authorities refuse to take
responsibility for the pernicious effects of its own tax policies. The country
is increasingly isolating itself from the European struggle against tax
avoidance.
It
was also on Monday that the European Parliament's special committee on tax
rulings in the EU first spoke to the European Commission. Pierre Moscovici, the
European Commissioner who deals, among other issues, with tax affairs, was
grilled by various MEPs. Fabio de Masi, member of the special committee, asked
Moscovici whether he knew about the Eldorado research.
Mr.
de Masi also stated: “I believe Commissioner Moscovici should address Jeroen
Dijsselbloem who is chair of the Eurogroup which keeps imposing austerity
measures on Greece. At the same time, Dijsselbloem is also Minister of Finance of
the Dutch tax haven through which Greece and many other countries are deprived
of rightfully due tax revenues.
The Netherlands and the EU have a joint
responsibility to tackle tax avoidance and have to stop hypocritically
prescribing policies leading to economic depression while betraying the
principle of sincere cooperation between EU member states.”
Vice-chair
Eva Joly of the special committee on tax rulings mentioned above, stressed that
same point: "To call this hypocrisy is to put it mildly. It is time that
Dutch citizens realise how their governments have, for decades, been defending
this kind of robbery at industrial scale”.
The
report 'Fool's Gold' proves that Greece's economic recovery is being undermined
by tax avoiding practices carried out through letter-box companies in the
Netherlands. In 2012-2013, for instance, the Greek government lost € 1,7
million to the Canadian gold mining firm Eldorado Gold. The corporation was
using the Netherlands as a conduit to shift its interest income to Barbados, so
as to avoid paying taxes. The company has a number of gold mines in Greece
which are controversial for damaging the environment and causing human rights
abuses.
Structural
problem
The
problem is indeed structural. Dutch letter-box companies - well-known as
instruments for fiscal avoidance – are used by other companies for their
investments in Greece: BMW, Coca-Cola, Bosch, Dole and Footlocker, to mention a
few.
Of course, one could rightfully state that the €1.7
million in avoided tax from Eldorado Gold is just peanuts, in comparison with
the fiscal and economic issues of Greece. However, like the articles both stated, there are many
more companies involved in the tax avoidance through The Netherlands.
This behaviour has
a destructive effect on the tax moral of the Greek citizens: “why should we pay
our taxes, when these companies and many rich people are not paying theirs”.
The red and bold texts are blatant examples of the
Dutch shortsightedness in regards to such tax issues.
“We
use the European tax rules and our tax rulings to our advantage and we don’t
give a rat’s behind that this behaviour deprives Greece and other countries from
their badly needed tax yields. It is not our problem, so get the funk out of our
way”.
The Dutch people, who often have a very negative
opinion about Greece, don’t realize sufficiently that this tax avoidance in Greece is
enabled by The Netherlands, on their behalf.
While this development hardly yields extra jobs and prosperity in The Netherlands – the number of jobs in The Netherlands enabled by such tax evasion mounts to not much more than a few hundreds jobs – it is
very destructive for other countries.
Yet, the Dutch government assumes the ostrich position for as long as it lasts.
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