Dutch political parties say “Roll Over Beethoven”

Blog post only

If you follow a few people who are tax advisers on LinkedIn, you are probably familiar with their complaints about the deteriorating Dutch “investment climate”. The tax and regulatory regime keeps on getting less favourable for businesses. Unilever and Shell have already moved their headquarters out of the Netherlands. Boskalis is thinking about it and now it appears, that ASML (semiconductor company, currently the highest market cap of all Dutch headed groups) is also thinking moving critical activity out of the Netherlands (https://www.reuters.com/technology/dutch-government-scrambling-keep-asml-netherlands-newspaper-2024-03-06/ https://www.theguardian.com/world/2024/mar/06/dutch-ministers-trying-to-stop-tech-firm-asml-moving-abroad-over-foreign-labour-fears).

For once, the main complaint is not about the Dutch tax system, not directly about taxes. It is about ability to attract foreign labourers who are crucial to the innovative R&D activities that ASML is pursuing. So, the Dutch government is in active talks with ASML leaders trying to see if they convince ASML to keep pursuing their growth strategy in the Netherlands. Those talks were dubbed “Operation Beethoven”. The news about it broke last week through a whistleblower and it triggered a lot (mostly unfounded) speculation of improper offers to ASML. Several politicians were quick to decry the attempts, depict it as tone deaf and asking to Roll Over Beethoven (https://open.spotify.com/track/6C7aTTCUWRK7dD379yUT3W?si=585ecf53fafc4eda&nd=1&dlsi=51dc30ade3804442). Any attempts to make everyone act as brothers certainly failed.

Dutch advisers often come across as a bit tone deaf if they complain about deteriorating investment climate. As confirmed by recent research (https://fd.nl/politiek/1508210/belastingprofessionals-onder-druk-ik-word-aangezien-voor-schimmig?utm_medium=social&utm_source=app&utm_campaign=earned&utm_content=20240222&utm_term=app-ios), Dutch advisers see themselves as experts, even if they don’t always understand the economics behind taxes and usually fall back in repeating client talking points. They also tend to talk lowly about the general public’s perception and so yes, they come across as arrogant.

It doesn’t help that they haven’t always been forthright with the public and more focused in getting quick benefits for their clients. This means that their intervention in public debates are often treated with suspicion, even when they are being honest. Of course, a lot of Dutch tax advisers favour low corporate taxes (although below the 15% Pillar 2 rate has probably limited benefit nowadays), good tax incentives (eg QRTCs, even this article https://nos.nl/artikel/2512327-ambtenaren-wijzen-op-nieuwe-route-voor-omzeilen-wereldwijde-minimumbelasting misrepresents their benefits https://taxleonard.wordpress.com/2024/03/04/are-qrtcs-the-fatal-flaw-of-pillar-two/), but those tax policy priorities are not shared by the general public.

But they do sometimes have a point, even if they do not always choose the wisest words. In the Netherlands, the pendulum has now shifted the other direction with every policy question being “solved” by rolling back incentives, pushing regulation and budgetary holes on MNEs and other businesses. The mood is quite hostile to MNEs. The fact that major MNEs have left and are thinking about leaving is a worrying sign. This opinion piece occasionally comes dangerously close to falling into familiar traps of arguing pipe dreams of low corporate taxes that have little chance of being acceptable to the broader public (https://fd.nl/opinie/1510377/den-haag-wordt-langzaam-wakker-maar-kwaad-is-al-geschied?utm_medium=social&utm_source=linkedin&utm_campaign=earned&utm_content=20240311). But it also outlines in clear terms why having global and regional headquarters helps the overall economy and why it might be good to use the tax system to attract such headquarters. The article is strongest when it argues for more predictability, reliability and erring on the side of business friendly.

That’s a good starting point. But ultimately, it will need to translate to specific policy proposals. Past experience teaches us that those discussions get polluted both with commercial interests of tax advisers and misplaced accusations of “selling out”. All sides of the political spectrum make such errors and it is difficult to keep such discussions clean. (Clean here does not mean a technocratic discussion, but instead a discussion that clearly outlines the real policy questions.) Ideally, all sides of politics would come together, agree (by compromise if no other way is possible) what the core tenets of Dutch tax policy are and then stick to it. That could provide an investment boost, as long as it’s credible that policy is not subject to intermittent change. A possible less business friendly than current tax policy is less important than stability. But given how event driven politics is today, it’s difficult to see how such stable tax policy would ever be formed.

Obvious disclaimers: this is not advice. These views are my own and do not necessarily represent my employer.