By offering more and more tax benefits, countries are missing out on tax revenues. In addition to tax avoidance and evasion, so-called tax breaks severely limited the tax revenues of countries. They compete to bring in foreign investment by offering large tax breaks to large multinationals. This is also called a “race to the bottom”.
Developing countries
Developing countries have a lot of trouble collecting taxes, partly because rich people and multinationals are able to avoid and evade taxes. These countries are therefore still dependent on development aid. The use the small business tax prep comes perfect.
Tax havens play an important role in tax avoidance and tax evasion. These are countries that have favorable agreements and laws with regard to taxes. Sometimes they have beautiful white beaches with palm trees or sometimes high White Mountains, but what they have in common: they offer wealthy individuals, multinationals or even criminals some of the following benefits:
- Low or no load
- confidentiality
- Avoiding financial rules
Evasion of criminal rules
The country is also a kind of tax haven. The country offers foreign companies all kinds of tax benefits so that they hardly have to pay any tax, but this does not apply to companies from their own country or to country citizens. That is why we call the country a treaty paradise.
The country as a tax haven
The country functions as a spider in the web for large companies that channel their income untaxed from poor and rich countries. Developing countries annually lose at least approximately € 460 million through tax avoidance via the country. Worldwide, governments miss out on approximately € 5.4 billion in tax due to the country policy of tolerance for tax avoidance.
Almost all internationally operating companies (80% of the largest companies in the world) have incorporated a country branch into their corporate culture. Not because they carry out economic activities here, but because they can make use of the tax options offered by such a country establishment.
Internationally, the country is the largest transit country in the world. Money flows from all over the world pass through the country via so-called letterbox companies (also known as ‘special financial institutions’). The estimated 20,000 letterbox companies in the country do not pay social security contributions and are not really economically active in our country.
What makes the country a conduit country?
The country has tax treaties with 94 countries. In these treaties agreements are made about the level of withholding tax (this is officially called: levying the tax at source).
For example, the country wants to reduce withholding tax on cash flows such as interest, royalties and dividends through tax treaties. In addition, the country has no withholding tax at all on outgoing interest and royalty flows. This means that amounts can flow in and out of the country (virtually) untaxed.
