Exception made for international mother companies regarding government support

BNR Nieuwsradio
Erasmus School of Economics

Professor of Economics of Taxation at Erasmus School of Economics Peter Kavelaars called in on a show of BNR Nieuwsradio to discuss a policy change concerning the pay-out of dividends, hand-out of bonuses or buybacks of shares by foreign multinationals in conjunction with government aid.

Companies which apply for aid concerning wage payments due to COVID-19 are technically not allowed to hand out bonuses, pay dividends or buy back shares. This policy complies with the wishes of a major share of Dutch members of parliament. However, Wouter Koolmees, the Dutch minister of Social Affairs and Employment, announced an exception has been made for foreign mother companies of Dutch branches, following pressure from the corporate sector.

Last summer

This change of policy has been brought forward by Koolmees in the summertime, but seems to only now gain attention, supposedly because of an article written by NOS. In a broadcast of BNR Nieuwsradio, Kavelaars goes over the arguments given by functionaries in support of the policy change. Firstly, functionaries discovered that the Netherlands is one of the most severe countries, imposing rigorous measures in order to prevent the misuse of means provided by the Dutch government and therewith paid for by Dutch citizens. According to Kavelaars, there are two reasons why this is undesirable. From a legal perspective, it’s quite hard to require foreign-based companies to adhere to laws they do not have anything to do with. As an example to illustrate the absurdity of this, Kavelaars mentions the idea that the French government would be imposing rules upon strictly Dutch companies. Secondly, strict policies such as these damage the attractiveness of the Dutch economy. Foreign investors will tend to invest in other countries, since business climate may be better somewhere else. As a guideline, Kavelaars proposes it is best not to be more difficult than other countries.

The second argument posed by government employees, is the reasoning that companies with a foreign parent won’t apply for government support, which will negatively impact job security. In order to preserve Dutch jobs, it would therefore be necessary to make an exception. Even though this might be a possible effect, Kavelaars disputes the idea that this impact would be very substantial. There are quite some other variables which have an effect on considerations of companies. These are, amongst others, profit expectations, future expectations, and the structure of the companies themselves. Kavelaars adds that he expects and hopes these measures to be a temporary matter.

More information

You can listen to the fragment with Kavelaars of BNR Nieuwsradio, 19 November 2020, here.