Reports allege oil group’s plan has cost Dutch treasury as much as £6.1bn in lost income.
Shell has hit back at criticism of a tax structure it set up as part of a relocation of its headquarters from London to The Hague following reports that it has cost the Dutch treasury as much as €7bn (£6.1bn) in lost income.
Calls have been made for the European commission to investigate the oil group’s tax affairs after reports claimed that a multibillion-euro bill has been avoided through the use of an offshore trust in Jersey since 2005.
The arrangement dates back to the Anglo-Dutch company’s merger of its two branches to establish a single headquarters in The Hague. During discussions over the move, the Dutch tax authorities agreed to exempt its UK-based shareholders from paying a withholding tax on dividend payments if they were routed through Jersey.
The Dutch newspaper Trouw has reported claims that the deal is in conflict with European Union rules and that Shell could be liable to treatment similar to that of Apple for arrangements that breached EU state aid rules. Despite an ongoing appeal, the tech giant has in recent months started to pay €13bn (£11.4bn) in back taxes.
Paul Tang, a Dutch MEP in the opposition Labour party, told the paper he would refer the Shell case to Brussels.
He said: “The probability that the European commission will go after this tax arrangement with Shell is huge. With European law in hand, this construction can be reversed.”
The leader of the Greens in the Dutch parliament, Jesse Klaver, has also called for an investigation by the Dutch parliament into the arrangement.
Marjan van Loon, the president director of Shell Nederland, insisted the Dutch taxpayer had benefited from the company’s move to the Netherlands.
She said: “I am astonished about the way we are portrayed in Trouw. This is tendentious. The fact that our headquarters is in the Netherlands … has been very good for the Dutch treasury.”
The Netherlands levies a dividend withholding tax unlike the UK. In order to protect its UK-based shareholders, the company created a structure of A (60%) and B shares (40%) when it relocated.
In a statement, the company said: “No tax is levied on dividends from B shares, provided that they are paid via the so-called dividend access mechanism.
“This solved the problem for the shareholders in the British parent company and made it possible for Shell to unify in one headquarters location, The Hague.
“The dividend access mechanism is fully in line with the tax laws and regulations in the Netherlands. The right to levy dividend withholding tax on dividends paid to shareholders in the former British parent company has never existed in the Netherlands.
“The effect of the dividend access mechanism was simply that this situation continued after the combination of the parent companies. We have always been transparent about the dividend access mechanism in our annual reports.”
The Centre for Research on Multinational Corporations has estimated that the oil company has distributed a total of more than €45bn to shareholders via Jersey, of which €7bn could have been taken by the Dutch taxman.
The Dutch government is seeking to abolish the dividend tax altogether, with the support of Shell and Unilever, which also recently announced its intention to relocate from the UK.
Shell claims that some 2,300 Dutch companies have “achieved an annual turnover of between $4bn and $6.5bn through contracts with Shell since its move to The Hague”.