The Dutch parliament will insist on Shell sending a representative to attend a hearing on tax avoidance by multinationals. The warning is given as Shell’s Dutch Chief Executive had previously declined the invitation.
In the Netherlands Shell derives income from its head office’s activities, service stations, the chemical plants in Moerdijk, and the refinery in Pernis. All in all, Shell made 1.3 billion euros in profit on those activities last year. However, Shell most likely pays zero euros in corporate tax with regard to the profit they generate.
Shell has two main ways to brush away the profits made in the Netherlands, so as not to pay tax, using legal deductions. Firstly, the company can deduct interest in the Netherlands for loans that are used to invest abroad. And secondly, Shell charges losses suffered from, for example, the search for oil abroad, against the profit made in the Netherlands. Profits made by foreign oil extraction are not taxed in the Netherlands, but the losses made with that oil extraction may be deducted from Dutch profits.
Besides eroding the profit to avoid the corporate tax, Shell also arranged its structure to avoid the withholding tax for dividend. Shell’s corporate structure features a parent company headquartered in The Hague but two share classes and other arrangements to prevent the Dutch government from levying withholding tax on dividends paid to shareholders of its former British arm.
In response to these arrangements, the Dutch parliament is willing to invite Shell to attend the tax avoidance hearing. However, Shell’s Dutch Chief Executive had previously declined an invitation, saying it made more sense for the Netherlands’ business association to represent all taxpaying companies.
However, during the committee meeting, the parliament wanted shell to attend to answer the questions raised during the hearings with regard to its business arrangement that lead to the absence of withholding tax on dividends paid to its shareholders. Lawmaker Pieter Omtzigt said in a statement the parties had unanimously asked parliament’s chairwoman to “forcefully” ask Shell to come.
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