The Territorial Taxation Experience in the Netherlands

November 16, 2012

International Expansion Supports Strong Domestic Growth

Washington, D.C., November 16, 2012—In an increasingly integrated global economy, U.S. companies need every advantage possible – including a reasonable, efficient tax code – when competing for business abroad. The experience of countries such as The Netherlands has shown that moving to a “territorial” system in which corporations are no longer double-taxed on international profits is one of the best ways to achieve such an advantage. The Tax Foundation’s case study on The Netherlands is the fifth in a five-part series on territorial tax systems.

Long-term labor force statistics have been encouraging, with the unemployment rate in the Netherlands trending downward since the early 1980s. Particularly since 1998, Dutch employment figures have consistently scored better marks than the U.S., and in 2011, unemployment in the Netherlands was half of the U.S. figure. This occurred while the Dutch pursued a policy of foreign engagement and outbound investment.

The Dutch system’s tax revenue performance is equally positive. It has consistently out-yielded the U.S. system, as well as the average for economically advanced nations, until very recently. In only one of the last thirty years did the U.S. worldwide system collect more tax revenue as a share of economic output than its Dutch counterpart. And like Canada, this has occurred in the context of ever-decreasing tax rates. The top marginal rate has been lowered five times since 2001, moving from 35 percent to 25 percent.

The Netherlands has operated a competitive territorial system with substantially lower corporate tax rates than in the U.S. and it has experienced better labor outcomes and greater levels of corporate tax revenue. The Dutch case specifically rebuts the common fears associated with territorial taxation.

Tax Foundation Fiscal Fact No. 338, “The Territorial Taxation Experience in the Netherlands” is available here. For a more in depth discussion, please see Tax Foundation Special Report No. 202, “A Global Perspective on Territorial Taxation.”

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

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