Tax on golden handshakes in all of Europe?

Tax on golden handshakes in all of Europe?

19th May 2008, Comments 0 comments

A proposal by the Dutch deputy prime minister Wouter Bos to crack down on golden handshakes might be adopted by other European countries. The finance ministers of the euro-zone countries say they will study the possibility of changing European laws so that golden handshakes can be taxed. It may not seem likely, but the ministers' apparent approval of Mr Bos' proposal is in any event surprising. By Perro de Jong.

Wouter BosA proposal by the Dutch deputy prime minister Wouter Bos to crack down on golden handshakes might be adopted by other European countries. The finance ministers of the euro-zone countries say they will study the possibility of changing European laws so that golden handshakes can be taxed. It may not seem likely, but the ministers' apparent approval of Mr Bos' proposal is in any event surprising.

If all goes to plan, next year the Netherlands will be the first European country to levy a 30 percent tax on companies which give departing senior managers a golden handshake worth more than half a million euros.

The International Herald Tribune finds the proposal typically Dutch. The fact that senior managers such as Numico's Jan Bennink and ABN AMRO's Rijkman Groenink received a jackpot of tens of millions of euros when they had to leave is a thorn in the flesh of the "egalitarian Dutch", who place social equality above anything else.

Trendsetter in Europe

Mr Bos says this is nonsense:

"Everyone thinks something must be done about this issue. There are countless examples of countries where people are attempting to do something about the situation. The Netherlands is taking the lead, and in another five or ten years many countries will follow." In Brussels, the Dutch deputy prime minister received the support of Jean-Claude Juncker, the Luxembourg head of the group of 15 euro-zone countries. Mr Juncker says that the "excesses" which we are seeing in some countries are "scandalous". He says that taking measures are not only a question of "professional ethics" but also a job for the tax authorities.

Mr Juncker made the statement following calls for across the board restraints in wage increases within the euro-zone. He says the restraints are necessary in order to end recent rises in inflation. Luxembourg's prime minister said one couldn't expect European workers to show moderation in their demands for higher wages while senior managers are receiving enormous increases.

Exodus to the US
However, it is extremely difficult to harmonise tax laws, since the individual countries have far-reaching powers in this field. Opponents of the plan say that senior managers will leave European companies to work in countries that do not have a tax on golden handshakes, such as the United States. However, Mr Bos does not fear an exodus:

"Executive pay is even an issue in the American election campaign, in any event that of Obama and Clinton. And many employers and entrepreneurs would like to do something about the excesses because entrepreneurs also have responsibilities. Entrepreneurs are receiving a negative image because a few people are putting their hands in the till."

However Mr Juncker later backtracked by saying he feared the tax would damage Europe's competitive position. He said a tax could only be introduced in Europe if countries outside the 27 EU member states also introduce such a tax. This could take time, even if Obama or Clinton wins the US presidential election.

One at a time
Mr Juncker's previous statement in support of the tax was apparently no more than an attempt to soften the blow of wage moderation for the lower incomes. However Mr Bos is not concerned. He says a European law isn't even necessary.

"This can be done on a national level. We are introducing legislation in the Netherlands, Germany is considering legislation, France has already formulated a law. Brussels is only necessary so that we can learn from one another. Perhaps the steps we take here in the Netherlands can be adopted in oExpatica Control Managment Areather countries and maybe other countries are doing things which we will copy." Mr Bos says it was enough to give this signal at the meeting of finance ministers. "I am counting my blessings."

19 May 2008 

[Copyright Radio Netherlands 2008] 

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