Dutch Drop Plan to End Dividend Tax After Unilever U.K. Decision

(Bloomberg) -- Dutch Prime Minister Mark Rutte abandoned a proposal to end a dividend-withholding tax in an about-face triggered by Unilever’s decision to forgo a plan to consolidate its headquarters in the Netherlands.

Rutte withdrew the proposal a week after saying his government would reconsider the measure, Dutch press agency ANP reported. Abolishing the dividend tax would have cost Dutch state coffers 1.9 billion euros ($2.2 billion). Nixing it means Rutte faces an embarrassment of riches, which he aims to spend on tax measures to keep the Netherlands attractive to businesses. Opposition parties have demanded more spending to benefit locals.

His four-party cabinet wants to spend the tax revenue entirely on companies and the business environment in the country, Rutte said at a press conference in The Hague after meeting with coalition partners.

“We’ll spend the money on the business climate,” Rutte said, according to public broadcaster NOS.

On Oct. 5, hours after Unilever’s announcement to withdraw its plan for single headquarters in Rotterdam, Rutte said he would reconsider a broad package of tax measures for companies, including ending the dividend tax. The Anglo-Dutch giant had originally tabled the proposal in March, saying a single Rotterdam base would give the company more flexibility to “undertake major M&A.”

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The decision by the maker of Dove soap and Ben & Jerry’s ice cream was a blow to Rutte after the 51-year-old third-time prime minister -- and former Unilever employee -- had repeatedly said that ending the dividend tax was aimed at making the country attractive to multinationals like Unilever.

Opposition parties, from Geert Wilders’ anti-islam party PVV to the Greens, flatly rejected Rutte’s reasoning, saying the measure was nothing more than a gift to multinationals. Only 16 percent of the Dutch were in favor of ending the tax, which they said would help large companies at the expense of ordinary citizens.

Sticking to the dividend tax proposal has played a part in hurting the popularity of Rutte’s cabinet. An Oct. 14 survey conducted by Maurice de Hond showed a significant decline in support, with the poll giving the combination of the four parties in government only 50 seats in the 150-seat lower house, a drop from the 76 they currently hold in parliament.

The next big electoral test for Rutte and his Dutch government will come in March of next year, when voters head to the booths in the country’s 12 provinces, with members of the provincial councils picking the members of the 75-seat Senate. Rutte’s cabinet only has a majority of one seat in both houses of parliament.

©2018 Bloomberg L.P.