Dutch government postpones punitive tax bill

The summer recess will give time for the government to refine its plans, which critics have said could lead to an industry exodus to more favourable neighbouring jurisdictions.

The Dutch government yesterday gave domestic private equity firms a stay of execution after it postponed voting on a bill which would have seen tax on profits from private equity rocket

Instead of voting at the end of this month it will now wait until September after its summer recess.

According to reports in Dutch finance paper Financieele Dagblad a number of venture capitalists had threatened to leave the Netherlands if MPs vote in favour of a plan to increase tax on their profits from 1.2 percent to 52 percent on “lucrative interests”.

Rob Thielen of Waterland Private Equity told the paper: “This is a slap in the face. Many will move operations to Luxemburg and Belgium. We are entrepreneurs. We take the risk.”

Other critics including politicians, universities and private equity firms said the bill did not clearly define the “lucrative interests” that would be taxed at the higher rate.

The Bill proposes a tax bracket of up to 52 percent for lucrative interests – certain shares, receivables or similar rights.  Fund managers will be taxed at 52% in principle but at 25% if they meet certain criteria including holding interests through a substantial interest in an entity.

The tax hike is one of finance minister Wouter Bos’s plans to tackle excessive pay packets. The aim is to “take a more balanced approach to taxing private equity mangers’ profits,” the paper said.

Floris van Alkemade of Solid Ventures, a company that invests in high tech firms, said his firm will stop if the tax goes through, with serious consequences for small firms. “This will be disastrous for the policy of innovation,” he told the paper.

The Dutch association of venture capital groups NVP has written to MPs warning them of the consequences.