Speech staatssecretaris Snel bij seminar Young IFA Network
Staatssecretaris Snel (Financiën) sprak op donderdag 7 maart 2019 in Den Haag bij een seminar van het Young IFA Network over de toekomst van het Nederlandse netwerk van belastingverdragen.
De toespraak is alleen in het Engels beschikbaar. Het gesproken woord geldt.
Ladies and gentlemen,
As some of you may know, I lived in Washington DC for 5 years.
While preparing my speech for today, I remembered the quote carved on the façade of America’s Internal Revenue Service headquarters. I walked passed it many times.
The building stands on Constitution Avenue, not far from the White House. The quote on its façade is by Oliver Wendell Holmes, Jr. and it reads: “Taxes are what we pay for a civilized society.”
Wendell Holmes, Jr. was a jurist and associate justice of the Supreme Court of the United States in the late-19th and early-20th century. He fought side by side with then-president Abraham Lincoln in the American Civil War. Famously he shouted ‘Get down you fool!’ at Lincoln when both came under fire at Fort Stevens, a military installation that guarded the mouth of the Colombia River.
His quote about taxes, however, was made in peace time. He said it during a Supreme Court ruling on the taxation of a Spanish tobacco company in 1904. The company did not want to pay taxes on their activities in the Philippines, arguing that they were a Spanish-based company. The Supreme Court decided in favour of the IRS.
I think Wendell Holmes’ quote can be read as words of comfort for those being taxed. But they may also be read as a word of warning for what might happen if everyone would refuse to pay their fair share.
Of course there are those that feel taxation in itself is unjust, unfair and therefore uncivilized. It is exactly why I believe that just and fair taxation is 1 of the cornerstones of our society. Achieving such a just and fair system requires a balancing act. A continuous one, I might add, as changing circumstances can upset the balance. Correcting such an upset means regularly tweaking the system and, sometimes – if necessary – making more rigorous changes.
Oliver Wendell Holmes, Jr. lived in a time when nations could change their taxation without much regard for other nations. But that was a century ago. Today we are all connected, entangled and dependent on 1 another. It is civil for us to take into account the interests of other nations.
We do so by signing trade treaties and making arrangements for taxation of globally active companies. We do this to keep things just and fair.
The Netherlands has a long history of international trade. Perhaps not a just and fair history, but then histories seldom are.
Nevertheless, our economy has always been open, geared towards import and export. It is vital for a small country like ours, strategically located as it is. We like it when businesses from abroad choose the Netherlands as their home away from home. It’s good for our economy and for our society as a whole.
Our tax system is welcoming to businesses. It also reflects our international orientation. And it takes due regard of befriended nations.
Having said that, and as hospitable as we are to entrepreneurship, we must not lose sight of the people that form our society. The people that live and work in the Netherlands.
There must always be a fairness in the taxing of companies and households. This is where the balancing act comes in. It is why we tax the profits of companies that operate in the Netherlands. It is why our corporation tax is on par with the EU average. It is why we share information about companies and corporate taxation with other nations.
And it is why the Netherlands is committed to combatting tax evasion and avoidance. Everyone must pay their fair share; all companies large and small. If companies can defer taxation or avoid paying it altogether, the costs of public services will be passed on to citizens and business that do pay their tax on time. That is unjust and unfair.
That’s why the Netherlands is a committed participant in the OECD project, commissioned by the G20, to combat base erosion and profit shifting. It is why we made tax avoidance a priority during the Dutch EU-presidency and drew up the first EU directive addressing it.
What’s more, we’re wholehearted in our implementation of international treaties and agreements. We go above and beyond what is required. We feel we need to. Why?
Because our internationally oriented tax system can be used by companies to erode the tax base of other countries. This – of course – is explicitly not our intention. That’s why we’re introducing some unilateral measures. Because, let’s be frank: a lot of capital flows through the Netherlands.
The most important measure is the introduction of a withholding tax on interest and royalties. So, from 2021, we’ll be taking action targeting the 22 billion euros that flows to low-tax jurisdictions. This will help us prevent the Netherlands being used as a conduit to tax havens and as a means to erode the tax base of other countries. It is a crucial step in the fight against tax avoidance.
However, and as I’m sure you know, these kinds of unilateral measures have their limitations. There are ways around it. Loopholes. Or as some tax advisors like to call them: solutions.
It is why I’m a proponent of a coordinated international approach. Such an approach is also needed to find a solution for one of the biggest conundrums we face today: The taxation of so-called platform-based companies. Those businesses that operate solely online. Amazon, Airbnb, Google, Netflix, Spotify, Uber, to name a few but not the least of them.
What to do?
The current international rules on profit allocation stem from the bricks-and-mortar era, when value could easily be attributed to real physical tasks. When our friend Wendell Holmes, Jr. was alive …
But in these new business models, value can be created in markets without physical presence. Where is their value created? And who should tax it?
Obviously, this does not just concern Big Tech. Everything today is digital or has at least a digital component. And it’s not just companies, our entire economy is digital.
A new economy asks for new fiscal rules. It’s clear that the current rules need to be revised.
So it’s good that we’re working within the OECD to find long-term world-wide solutions to these issues. To build a system that will meet our needs for some time to come.
And of course, if we’re building a new system, with new rules, we don’t want them to lead to new discussions about who gets a bigger piece of the pie. Such discussions and uncertainty brings harm to our business climate.
That’s why I think it is very important to make good arrangements and rules to resolve disputes between countries when double taxation occurs.
In closing ladies and gentlemen, The Netherlands stands for just and fair taxation. I strongly believe in the words of Wendell Holmes: in civilised societies, everyone pays their fair share of tax.
Yes, we welcome businesses from all over the world to become active in our country. We also wish for Dutch entrepreneurs to be able to locate their companies in other countries. And no, we do not believe in constricting business with heavy tax burdens. But we do not think passing on the bill to citizens is fair either.
I once heard the allocation of private and public money explained as the difference between driving in a big car on a poorly-maintained road versus driving in a small car on a well-maintained one.
I am convinced that if all citizens, small-business owners and multinationals pay their fair share, we could all drive in relatively spacious, electric(!) cars on excellent roads.
Look outside and you’ll see we aren’t doing too bad here. I think it’s relatively civilised.
Taxes are a small price to pay.