The state of 2016

2016 will most likely be remembered for being the year of surprises, such as Brexit and the election of Donald Trump. Or will we say that those weren’t surprises but rather the first signs of a new era? An era of division between those who benefited from globalisation and those who did not. Some people are wondering who stole all those jobs in the Midlands and in the Midwest. Was it the Polish, the Mexicans or globalisation? Or should the rise of populism be attributed to a rebelling, dissatisfied middle class. Growing uncertainty about their future, their pensions, and other benefits.

2016 will unfortunately not go down as the year of peace in Syria and the solution for the refugee crisis. Politicians appear to be fighting PO box companies with more enthusiasm. Their best days seem to be a thing of the past.

The disappointment of missing the Euro 2016 in France was made up in Rio de Janeiro. The Netherlands came in 11th in the medal table of the Olympic Games with 19 medals, of which 8 gold ones. Where we all hoped for Dafne Schippers, the best performance was clearly from gymnast Sanne Wevers on the balance beam.

Also this year we didn’t win the Nobel prize for literature. But in Barcelona Max Verstappen is the first Dutchman ever to win a Grand Prix.

We had to say goodbye to Prince, B.B. King, David Bowie, Mieke Telkamp and Toots Thielemans.

Margot Honecker and Nancy Reagan, two former first ladies, passed away, as well as former presidents Simon Perez and Fidel Castro.

With Muhammed Ali’s passing we lost the greatest boxer the world has ever known. The biggest loss for The Netherlands was the loss of number 14: Johan Cruijff. El Salvador is no more.

Allow me to say some words on our field: tax matters.

It is impossible to imagine the world today without transparency, as it is getting ready for Country-by-Country Reporting, the Common Reporting Standard and the UBO register. Apart from a single French judge not much attention is being paid to the privacy of individual tax payers.

The Panama Papers were revealed in spring. A large group of research journalists from more than 70 countries reviewed more than 11.5 million leaked documents of Mossack Fonseca. In some cases, the journalists were able to find out who was behind companies in tax havens. The Dutch State Secretary of Finance later went on to say in a debate in parliament that it is very disappointing that so little information is found about Dutch people… It depends on what you call disappointing.

Right before the end of the Dutch presidency of the EU at the end of June 2016, a political agreement was reached for the Anti-Tax Avoidance Directive (“ATAD”). A true masterpiece of our Minister of Finance Jeroen Dijsselbloem. ATAD contains the minimum standards EU member states have to implement before the 1st of January 2019 (with some exceptions). In essence, the measures should combat the alleged aggressive tax planning by multinationals. The only problem is that certain measures allow multiple options. With a bit of bad luck, MNEs will have to deal with 27 different implementations of the same Directive. It seems that no political agreement will be reached in 2016 on a proposal on hybrid mismatches involving third countries, i.e. non-EU countries.

But good news for the summer holidays, the Dutch Supreme Court decided that the reduced VAT rate also applies to sunscreen, due to its therapeutic effects.

After more than two years of studying, the European Commission reached its verdict on Apple; the tax rulings the Irish government concluded with Apple in the early 90’s, were – in the eyes of the Commission – too beneficial and can be considered state aid. Apple has to repay the benefit which amounts to EUR 13 billion. The Commission has a surprising suggestion: the amount due can be reduced if Apple still has to pay more corporate tax in other countries for prior years. The United States’ criticism on the state aid cases of the European Commission is not surprising (refer for example the White Paper of the US Treasury Department). Perhaps not realistic but the US legislation has the option to double the corporate tax rates for European companies active in the US. This could turn out to be interesting.

Budget Day in the Netherlands was calm and quiet with the general elections on the doorstep; very few choices were made. The State Secretary of Finance did present a most welcome letter on dividend tax; the plan is to no longer impose dividend withholding tax to corporate shareholders as of 2018 for all treaty countries. This currently only applies to EU member states.

I’m curious to find out what 2017 will bring us. Will president-elect Donald Trump hold true to his word to lower the US corporate tax rate to a whopping 15%? And will he actually repatriate all the money US multinationals have stored outside of the US (estimated at USD 2,100 billion) and at what rate? Now that the Republicans rule both Houses in Congress, the long-standing status quo may be broken.

Closer to home we wonder whether Europe will be ready to implement the Common Consolidated Corporate Tax Base. Without consolidation at first probably. With the Brexit and election results of the political parties who are sceptical of Brussels, politicians should ponder what kind of Europe they want. A far-reaching integration in the field of direct taxation and giving up sovereignty seems unlikely in these times. Or would the call for a European approach of tax evasion win?

The Netherlands is facing general elections in March. I haven’t read all party programmes yet, but I dare to say that “taxation” will be a bigger issue than ever before. We also made it to the board room and the front page of newspapers. I can’t say whether this is a blessing or not.

I wish you all a Merry Christmas and a prosperous and healthy 2017.

See you next year.

Ivo Kuipers (in personal capacity)

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