The Netherlands ranks mid-level financial secrecy

by Dan Dulvac

Every 2 years, the Tax Justice Network ranks countries according to their contribution to global tax evasion, illicit financial flows and levels of secrecy. The Financial Secrecy Index 2015, launched at the beginning of this month, reveals what jurisdictions are considered the best tax havens for multinational companies. This year, the Netherlands holds the 41st spot with a mid-range level of secrecy and a small share of the global market for offshore financial services compared to other secret jurisdictions.



According to the Tax Justice Network, the problems of offshore secrecy “go far beyond tax”. Lack of transparency “corrupts and distorts markets and investments, shaping them in ways that have nothing to do with efficiency”. Secrecy reduces accountability and creates a high risk for fraud, money laundering and escape from financial regulation.

Despite the Netherlands’ mid-level position on the Financial Secrecy Index, the risk of the Dutch financial sector is high. A risk due to the secrecy applied to the staggering amounts of capital flowing through it. According to the Dutch Centre for Research on Multinational Corporations (SOMO), “a tenth of the world’s total economy is run via Dutch mailbox companies”. Mailbox companies are used by parent companies to route 4000 billion euros through the Netherlands every year, most of which ends up in secrecy jurisdiction.

From these special financial institutions, the Netherlands gains approximately 3 billion euros a year, at the loss of tax revenue of other countries.

Despite attempts for reforms for substance requirements, which are necessary to ensure that multinational companies have a real economic presence in the Netherlands, the national Court of Audit concluded that the Dutch substance requirements are of such a low standard, they are easily fulfilled.

Low standards are often the outcome of a “race to the bottom” between nations for less regulation and less transparency aimed to attract multinational companies to “set-up shop” in the respective countries. With this, they seek to grab a relatively small share of the money, which is due to be paid in taxes where the wealth is actually created.


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