Parent companies pay out hundreds of millions to shareholders while their Dutch subsidiaries receive wage support

BNR Nieuwsradio
Erasmus School of Economics

Foreign parent companies of companies that have received a lot of wage support in the Netherlands pay out hundreds of millions in profits to shareholders. However crooked this may seem, the companies are not doing anything wrong legally, Peter Kavelaars, Professor of Economics of Taxation at Erasmus School of Economics, explains in an interview with BNR Nieuwsradio. According to Kavelaars, we should ask ourselves why these parent companies are not investing more in their Dutch subsidiaries.

Legally and factually impossible

If you look at the law, the parent companies are not doing anything wrong. Can we simply say that these companies are just making use of the opportunities offered to them? 'What matters most is that the parent companies pay the dividends,' says Kavelaars. 'And the companies that have received government support are Dutch subsidiaries. The Dutch government has nothing to say about these parent companies. They fall under a completely different law. It is therefore legally impossible to prevent this. Moreover, it is of course a possibility that these foreign companies also have subsidiaries in other countries where good profits are still made. It is therefore actually both legally and factually impossible to get a hold on that.'

Happy shareholders 

The companies themselves justify the profit distribution by emphasising the importance of keeping the shareholders happy. This ensures stability in the company. The companies also claim that the NOW support received in the Netherlands actually stays in the Netherlands. In doing so, they are in fact ensuring that people stay employed. 'This is indeed another point,' says Kavelaars. ‘You can assume that the aid received by Dutch companies actually stays in the Netherlands and is used for its intended purpose. The only thing you can regulate is that Dutch companies are not allowed to send any allowances to the parent company. But in this case, it is just about the profits that the foreign parent companies pay out to their shareholders.' 

Why should the Dutch government step in?

According to Kavelaars, the Dutch Ministry of Finance is not in a position to impose requirements on the parent companies of Dutch subsidiaries. 'The subsidiary cannot impose obligations on its parent company. And making direct demands on a foreign shareholder by the Dutch government is very complicated.' According to Kavelaars, one could only wonder whether the foreign parent companies should not invest more money in their Dutch subsidiaries. 'If there are apparently so many reserves available, then why should the Dutch government step in?'

Professor
More information

The full item from BNR Nieuwsradio, 19 March 2021, can be found here (in Dutch).