Economy

Europe's Best-Kept Secret: A Tax Haven For Rock Stars And Starbucks To Stash Earnings

Bono, Bowie, and the Rolling Stones, not to mention Apple, Google and Microsoft keep an address in the Netherlands, which doesn't tax profits by foreigners. What do locals say?

A mailbox in northern Holland
A mailbox in northern Holland
Rob Savelberg

Many European billionaires choose tiny South Pacific islands to hide their money from the taxman. But there are easier ways: just bring it to the Netherlands, where there are hardly any taxes to be paid on profits.

This reality is now the subject of an open conversation in the Netherlands because in times of recession, with the euro crisis and tight budgets, many Dutch citizens dislike the image of their country as a tax haven for the super-rich and mega-corporations.

Holding companies for corporations like Apple, Microsoft, Google, Ikea, Starbucks and others bring 8 trillion euros to the Netherlands every year to save on taxes – legally – via “mailbox” companies created there. A single office building in Amsterdam, for instance, is the registered mailbox for more than 2,670 companies.

Corporate tax is 20% to 25% in Holland, but is only levied on profit, not intellectual property.

"Jan Modaal" (Dutch for “Average Joe”) on the other hand has to cough up quite a bit; income taxes in the Netherlands are among the highest in Europe, and can amount to over 50%.

Because the Dutch do not tax royalties, the Netherlands is also appealing for musicians like David Bowie and the Rolling Stones who have amassed considerable wealth over the years from sales of records, CDs, and concert tickets. Also registered in the Netherlands is Irish rock band U2 – and lead singer Bono, thus ensuring that however vocal he may be about the poor in Africa he doesn’t have to fork over too much to the state.

Holding companies and multinationals also have the option of making special deals with Dutch tax authorities who are bound by an oath of secrecy. The country’s right-liberal government continues to support the whole system, which brings in over a billion euros a year.

Only The Dutch Pay Taxes

During the 2009 financial crisis, the U.S. put the Netherlands on a tax haven black list but the Dutch were able to persuade President Barack Obama to take the country off the list.

Many Dutch citizens apparently think that was a mistake, as the success of the Dutch book The Tax Haven – Why No One Here Pays Tax, Except You illustrates. In the book, author Joost van Kleef enumerates all the corporate money-saving tricks. "There are a lot of tax loopholes in our country," he writes. "Some legal entities for example don’t have to pay a tax on dividends. And the subsidiaries of huge multinationals registered here pay no or very little tax."

Van Kleef also points out that not only do English pop stars and American Internet giants do business here, but also billionaires from the former Eastern Bloc and top-earning soccer players.

Many rich Greeks also have a presence in the country, like European Goldfields, the Abela hotel chain, Hellenic Land Holdings and Crete Hellas Holdings. Lamda Development, which belongs to the richest man in Greece, Spiros Latsis, is also registered in the Netherlands – even as northern European taxpayers are backing Greece with billions so the country doesn’t go bankrupt.

Ironically, tax accountancy firm Deloitte has published a study according to which the Netherlands in not a tax haven. In the report, Peter Kavelaars, a Deloitte partner and professor of fiscal economy in Holland, makes the point that a reason why many large corporations register in the Netherlands is that withholding tax is only 15%.

But van Kleef doesn’t buy this. “You will find nearly every tax expert who advises the government, parliament, government ministers, somewhere on the payroll of either Deloitte or Ernst & Young – companies earning big time from the Dutch tax evasion paradise," he says.

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Society

Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum

-Analysis-

SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.


It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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