The Netherlands is a corporate tax haven for US multinationals and, together with Ireland and Bermuda, it is sheltering companies' earnings from the American tax authorities, a US Treasury Statement suggested on Monday. As long as they keep their earnings overseas, US companies are legally exempt from paying. Taxes only become due when the money is "repatriated" to the United States.

The current practice is perfectly legal, but the US government considers it harmful to the American economy. President Obama announced a crackdown on the tax shelters, aiming to raise USD 210 billion in taxes over the next decade. A Wall Street Journal report in April quoted a figure of USD 58 billion in overseas earnings which are out of the tax office's reach, losing it an estimated USD 20 billion in tax revenue. One third of the foreign profits in 2003 came from what the US Treasury calls, "three small, low-tax countries: Bermuda, the Netherlands, and Ireland."

On Wednesday, the White House retracted its statement that the Netherlands is a corporate tax haven. The retraction came in the wake of an angry denial by Dutch Finance Minister Wouter Bos, who says the accusation is "completely unjust". Mr Bos also said that the Netherlands is not planning to change its tax system.

A spokesperson for Deputy Finance Minister Jan Kees de Jager says the White House informed the Dutch embassy in Washington that the Netherlands would be deleted from the list. "The deputy minister is glad that the misunderstanding has been cleared up."

US companies pay a 35 percent corporate tax, which can be reduced by various allowances, yielding an average of 22 percent. Taxes levied abroad are much lower, with Ireland's corporate tax at 12.5 percent. The Dutch rate is 25.5 percent. Only earnings made abroad by Dutch branches of multinationals which are based on their proprietary rights are not taxed under the Dutch system.

Hiding becomes illegal
Mr Obama's proposal for "getting tough on overseas tax havens" requires US businesses to report their overseas corporations on their US tax returns, making it illegal to hide them from the Inland Revenue Service. In addition, the plan aims to create fiscal incentives to create jobs in the US rather than abroad. If the plan, for which the administration is seeking bipartisan support, is passed by Congress, the IRS will hire nearly 800 new staff to enforce the rules.

Major multinationals like Pfizer, Oracle, Microsoft, Johnson & Johnson and General Electric are opposing the proposal, saying that it is giving an unfair advantage to companies whose head office is outside the US.

The Netherlands may not quite be a tax haven, but there are some perks for international companies based here. Especially when it comes to 'intellectual property': patents, copyrights on music and films, artistic rights and so on. Individuals or companies that own these rights get paid on a royalty basis, i.e., every time their patent or copyright is used -- wherever in the world -- they receive an amount of money.