Dutch May Voluntarily End Tax Exemption

(CN) - The European Commission "invited" the Dutch government to end a corporate tax exemption that applies only to publicly traded companies.

Under corporate tax law in the Netherlands, publicly held companies and administrative and service agencies enjoy an exemption from paying corporate taxes. While the government requires some industries and holdings - farming and mining undertakings, Amsterdam's Schiphol Airport and the National Lottery - to pay, others remain exempted from the tax.

Specifically, commissioners noted that the Port of Rotterdam, Holland Casino, Maastricht's airport, Bank of Industry LIOF, Twinning Holding and several development agencies do not pay corporate taxes. They first asked the Dutch government to change its tax laws in 2008, after receiving several complaints.

At that time, the commission found that the different tax treatment of publicly and privately owned companies distorted the internal market and gave public companies an economic edge.

The commission's procedures for fixing the inequity require a delicate dance of cooperation with the Dutch government, however, because the corporate tax law went into effect in 1956 - before the Netherlands joined the EU

"To deliver all its benefits our single market requires fair competition. There must be equality of arms for all market players and I am confident that the Netherlands will adapt their tax laws in that respect," said Joaquin Almunia, the commission vice president in charge of competition policy, in a statement.

When commissioners normally find illegal state aid, they assess fines equal to the amount given out plus interest. In this case, however, since the exemption predates the Netherlands' signing of the Treaty of Rome, it qualifies as "existing aid" and the commission simply asks for it to end.

Commissioners offered the Netherlands two options to fix the disparate tax codes: Either end the exemption entirely, or end the exemption only for publicly held companies and force public administrations to move their economic activities to taxable, publicly owned entities. Regulators prefer the Dutch government end the exemption entirely, according to the statement.

The Netherlands has one month to decide if it will comply with the commission's "invitation." If an agreement can't be reached, the commission said it may open a formal state aid investigation.

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