‘This research shows once again that a revision of our tax system is urgently needed. While our healthcare, education and safety are under pressure, investors and listed companies are simply given money as a gift with this exemption’, says Petra Bolster, member of the executive board of the FNV.
Buying back own shares is currently the way for listed companies to pay out tax-free money to shareholders. This profit distribution is tax-free in the Netherlands. ‘The FNV has been advocating for a revision of our tax system for years, which is why we entered into a partnership with SOMO‘, says Bolster. ‘It shouldn’t matter how you earn your money, everyone pays the same percentage of tax. And the strongest shoulders should bear the heaviest burden. It is possible, there is enough money in the Netherlands. It is time that companies also contribute their fair share to a healthy and liveable Netherlands. Our public facilities are a prerequisite for a strong and therefore sustainable economy’, says Bolster.
The calculations behind the research
Table of Contents
- 1 The calculations behind the research
- 2 Foreign investors benefit
- 3 2 billion euros per year seems like a lower limit
- 4 What are the financial implications of the tax exemption for share buybacks in the Netherlands?
- 5 – What are the implications of the tax exemption on share buybacks for the Dutch economy?
Table of Contents
The CPB and the Ministry of Finance previously calculated that the state treasury would lose 800 million euros annually if the tax on the purchase of own shares were abolished. This calculation was based on annual totals, a dataset provided by the Financieele Dagblad. These data were the best available at the time, but not specific enough to make an accurate estimate of the origin of the shareholders. This information is crucial to make an accurate calculation of (the loss of) income for the state treasury. The new SOMO study largely uses the same methodology as that of the CPB and the Ministry of Finance, but with more detailed data that show that this tax could yield at least 2 billion euros per year.
Foreign investors benefit
For this recalculation, SOMO has built up a dataset of companies that buy back shares in the Netherlands and are also liable for tax here. The origin of major shareholders has also been analysed for each company, which allowed a better estimate to be made of how much additional income this tax would lead to. It appears that these companies have significantly more foreign shareholders, on average 79%, who benefit from this tax exemption.
2 billion euros per year seems like a lower limit
It is conceivable that the lost revenues will be even higher, given all the tax benefits for companies in the Netherlands. Companies that have little material ties to the Netherlands also enjoy the opportunity to shift income from royalties, dividends and interest from foreign entities in a tax-efficient manner. The research shows that the amount of 2.0 billion per year is a lower limit, and can increase to 2.9 billion per year. ‘Large listed companies in particular use share buybacks to avoid dividend tax. For example, ING paid out more than 3.5 billion euros tax-free to its shareholders in 2023’, says Rodrigo Fernandez of SOMO.
You can read the full report on the SOMO website.
Urgent Need for Tax System Revision: Research Reveals Billions in Lost Revenue
The Netherlands is facing a pressing need to revise its tax system, as a recent research study has exposed a staggering loss of revenue due to a tax exemption for listed companies that buy back their own shares. This finding has sparked outrage among critics, who argue that the current system unfairly benefits wealthy investors and companies at the expense of the country’s public facilities and essential services.
The Tax Loophole: A Gift to Investors and Listed Companies
In the Netherlands, buying back own shares is a common practice among listed companies, allowing them to distribute profits to shareholders tax-free. This exemption has been criticized for unfairly benefiting investors and companies, while putting a strain on the country’s healthcare, education, and safety services. According to Petra Bolster, member of the executive board of the FNV, “this research shows once again that a revision of our tax system is urgently needed. While our healthcare, education, and safety are under pressure, investors and listed companies are simply given money as a gift with this exemption.”
The Need for a Fair and Sustainable Tax System
The FNV has long advocated for a revision of the tax system, partnering with SOMO to push for change. Bolster emphasizes that “it shouldn’t matter how you earn your money, everyone pays the same percentage of tax. And the strongest shoulders should bear the heaviest burden.” The current system is seen as unfair, with companies and investors reaping benefits while the general public bears the burden.
The Research: A Closer Look at the Numbers
Previous calculations by the CPB and the Ministry of Finance estimated that abolishing the tax on buying back own shares would result in an annual loss of 800 million euros for the state treasury. However, SOMO’s new study uses more detailed data to reveal a much higher estimate of at least 2 billion euros per year. This recalculation is based on a dataset of companies that buy back shares in the Netherlands and are liable for tax, with a focus on the origin of major shareholders.
Foreign Investors: The Primary Beneficiaries
The research also reveals that foreign investors are the primary beneficiaries of this tax exemption, with an average of 79% of major shareholders hailing from outside the Netherlands. This has led critics to argue that the current system is unfair and benefits foreign entities at the expense of the Dutch economy.
A Conservative Estimate: 2 Billion Euros Per Year
While the estimated loss of revenue is a staggering 2 billion euros per year, some experts believe that this figure may be a conservative estimate. With numerous tax benefits for companies in the Netherlands, it is possible that the actual lost revenue is even higher.
Conclusion: Time for Change
The recent research study has shone a spotlight on the urgent need for tax system reform in the Netherlands. With billions of euros in lost revenue, it is clear that the current system is unsustainable and unfair. The FNV and SOMO are calling for a revised tax system that ensures companies and investors contribute their fair share to the economy, rather than benefiting at the expense of the general public. As Bolster emphasizes, “it is time that companies also contribute their fair share to a healthy and liveable Netherlands. Our public facilities are a prerequisite for a strong and therefore sustainable economy.”
Keywords: tax system reform, Netherlands, listed companies, share buybacks, tax exemption, lost revenue, foreign investors, unfair taxation, public facilities, sustainable economy.
The Hidden Cost of Tax Exemptions: How Share Buybacks are Draining the Dutch Treasury
The Netherlands is known for its business-friendly environment, but a recent study by SOMO has shed light on a shocking truth. The country’s tax exemption on share buybacks is benefiting foreign investors and listed companies, while leaving the state treasury shortchanged to the tune of at least 2 billion euros per year. This loophole is not only unfair but also undermines the country’s public facilities, which are essential for a strong and sustainable economy.
A Call for Tax Reform
Petra Bolster, member of the executive board of the FNV, is adamant that this research highlights the urgent need for a revision of the tax system. “It shouldn’t matter how you earn your money, everyone pays the same percentage of tax. And the strongest shoulders should bear the heaviest burden,” she emphasizes. The current system, which allows listed companies to pay out tax-free money to shareholders through share buybacks, is unsustainable and unfair.
The Calculations Behind the Research
The SOMO study builds upon earlier research by the CPB and the Ministry of Finance, which estimated that abolishing the tax on share buybacks would cost the state treasury around 800 million euros annually. However, this calculation was based on limited data and did not account for the origin of shareholders. The new study uses more detailed data to provide a more accurate estimate of the lost revenue.
Foreign Investors Benefit the Most
The research reveals that foreign investors, who make up around 79% of major shareholders, are the primary beneficiaries of this tax exemption. This is a stark contrast to the notion that tax breaks are necessary to attract foreign investment and create jobs. Instead, it appears that these benefits are being enjoyed by those who contribute little to the Dutch economy.
A Conservative Estimate
The study’s estimate of 2 billion euros per year in lost revenue is likely a conservative figure. When considering the various tax benefits enjoyed by companies in the Netherlands, the actual amount could be significantly higher. In fact, the research suggests that the true figure could be as high as 2.9 billion euros per year.
The Financial Implications
The tax exemption on share buybacks has significant financial implications for the Netherlands. At a time when the country’s healthcare, education, and safety are under pressure, it is unjustifiable that companies are being given tax-free money at the expense of the state treasury. This revenue could be better spent on strengthening public facilities, which are essential for a healthy and sustainable economy.
Conclusion
The SOMO study has exposed a glaring injustice in the Dutch tax system. It is clear that the tax exemption on share buybacks is not only unfair but also unsustainable. As Petra Bolster puts it, “It is time that companies also contribute their fair share to a healthy and liveable Netherlands.” The Dutch government must take immediate action to revise the tax system and ensure that all individuals and companies are contributing their fair share. Only then can the Netherlands build a strong and sustainable economy that benefits all its citizens.
Keyword research:
Tax exemption on share buybacks
Netherlands tax system
SOMO study
FNV
Petra Bolster
CPB
Ministry of Finance
Foreign investors
Listed companies
Public facilities
Sustainable economy
Optimized meta tags:
Title: The Hidden Cost of Tax Exemptions: How Share Buybacks are Draining the Dutch Treasury
Description: A recent study by SOMO reveals that the Netherlands’ tax exemption on share buybacks is benefiting foreign investors and listed companies, while leaving the state treasury shortchanged. Learn more about the financial implications and the urgent need for tax reform.
Keywords: tax exemption, share buybacks, Netherlands, SOMO, FNV, CPB, Ministry of Finance, foreign investors, listed companies, public facilities, sustainable economy.
