Tax evasion by arms companies; double cynical

Martin Broek

Defence-industries profiting of the Dutch tax laws are double cynical. Apart from ethical objections, the defence industry are evading the very taxes which are uses by their governments to pamper them, buy their product, subsidize their research and facilitate their exports.

In 2009, US president Obama put the Netherlands on his list of the world's worst tax havens. The Dutch government did its utmost to deny this allegation. But the issue was on the agenda and has never disappeared since.

Stop Wapenhandel raised the issue already in 2001 when it criticized Airbus (then called EADS and one of the biggest international arms companies) having its juridical head quarters in the Netherlands for tax reasons only. EADS was established at the 11th floor of ING Trust: no books were kept. It had no desks, no telephone, hardly any staff and some papers on a shelf. The Defense News top-100 mentions the Netherlands as the EADS, now Airbus, location since 2003. However the Dutch government has no control about its exports, or for example the production of Airbus nuclear missiles. Since 2001 the Airbus presence has extended a little to more than just a desk, but it is still in no relation to what one should expect from one of Europe's major airspace companies.

The reasons for arms industries to have Dutch headquarters are threefold. The Netherlands has an enormous tax treaty network. Secondly the Netherlands tax law offers a participation exemption, which exempts dividends and capital gains from subsidiary companies abroad. Lastly the Dutch tax authorities use an advance ruling system on income taxation for entities offering 5 million or more to the Dutch economy. All these tax evasion possibilities continue to have the full support of the Dutch government ignoring criticism by civil society and advise by the Organisation for Economic Cooperation and Development (OECD)

In 2015 Stop Wapenhandel started to investigate the Dutch holdings for the 100 biggest defence companies. We found 31 arms companies having one or more holdings in the Netherlands. In value of production, they represent US$ 215 billion of the 450 billion globally earned with arms production. So of every two dollars earned with weapon production, one is backed up by the Netherlands' financial structures.

BAE Systems, for example, has two main entrances in Dutch chamber of commerce. First there is BAE SYSTEMS shared services (overseas) Ltd. The next is BAE Systems (Overseas Holdings) B.V. The BAES structures shows the complicated holding structures companies spin around themselves. Secretary Ann-Louise Holding – what's in a name - of Shared Services was also appointed at ninety different companies of which 70 yet inactive since the year 2000. She works e.g. also at BAE SYSTEMS Saudi Arabia (Vehicles and Equipment Nominees) Ltd. The employees are part of the financial menagerie of the UK weapon producer.

The defence industry holding structure shows the cynical behaviour of this industry. An industry claiming to be indispensable to defend our freedom and democracy uses the structures to profit at the expense of those paying taxes.

On the other hand it brings to the relatively small Netherlands the giant of the defence-industry. Three miles from my own home I can now protest at General Dynamics European Holdings B.V. The holding of a US Company known for deadly products such as the Trident nuclear submarine, the F-16 fighter jet, the M-1 tank and the Tomahawk cruise missile.

StopWapenhandel's report into the tax arrangements of arms companies in the Netherlands can be found here: http://www.stopwapenhandel.org/sites/stopwapenhandel.org/files/tax%20evation%20opmaakdef.pdf