Dutch exit tax could de­rail Unilever move

Con­sumer goods gi­ant may be forced to aban­don mov­ing HQ to Lon­don due to €11bn de­par­ture levy

The Daily Telegraph - Business - - Front Page - By Han­nah Ut­t­ley

UNILEVER could be forced to scrap plans to shift its head­quar­ters to Bri­tain in the face of an €11bn (£9.7bn) “de­par­ture tax” raid by Nether­lands MPs.

The Mar­mite maker warned that the move to aban­don its An­glo-Dutch struc­ture is un­der threat from a law pro­posed by the op­po­si­tion Green Left (Groen Links) party that would im­pose a levy on firms with an­nual rev­enues of more than €750m if they re­lo­cate their head­quar­ters abroad.

The pro­pos­als are in­tended to pre­vent large com­pa­nies from leav­ing the Nether­lands, and to make up for the loss of tax rev­enue if they do de­part.

Unilever, which owns brands in­clud­ing Ben & Jerry’s ice cream and Dove soap, has had its dual-headed struc­ture in place for close to a cen­tury af­ter it was cre­ated by the merger of a Dutch mar­garine com­pany and Bri­tish soap maker Lever Broth­ers.

It is not clear whether the law – which was pro­posed in June, just days af­ter Unilever re­vealed plans to exit Hol­land and move its le­gal base to Lon­don – is legally com­pli­ant with Dutch and Euro­pean leg­is­la­tion, nor whether it would be passed by the Dutch par­lia­ment.

The Nether­lands’ Coun­cil of State is con­sid­er­ing the pro­posed law but has not set a date for its de­ci­sion.

In share­holder doc­u­ments out­lin­ing de­tails of the pro­posed uni­fi­ca­tion,

Unilever said it did not think the Green Left’s pro­posed bill was le­gal.

How­ever, it added: “Nev­er­the­less, if the bill were en­acted in its present form, the boards be­lieve that pro­ceed­ing with uni­fi­ca­tion, if it re­sulted in an exit tax charge of some €11bn, would not be in the best in­ter­ests of Unilever.”

The FTSE 100 con­sumer goods ti­tan said it could choose not to pur­sue its uni­fi­ca­tion as a re­sult.

Unilever hopes to com­plete the merger of its oper­a­tions over the week­end of Nov 21 and 22, with Dutch share­hold­ers set to vote on the pro­pos­als on Sept 21 and UK in­vestors on Oct 12.

If the Green Left party’s law were to pass it would come as an em­bar­rass­ing blow to Unilever two years af­ter it scrapped plans to move its head­quar­ters to Hol­land fol­low­ing up­roar among in­vestors. Unilever’s planned changes to its le­gal struc­ture are in­tended to make it eas­ier to carry out ac­qui­si­tions or sell-offs – in­clud­ing a po­ten­tial sale of its tea arm, which makes PG Tips.

The pro­pos­als also raise the pos­si­bil­ity of a break-up of the busi­ness.

Dutch MP Bart Snels, who sub­mit­ted the pro­pos­als on be­half of the Green Left party, said he is con­fi­dent that the bill would se­cure the ap­proval of MPs af­ter Unilever warned it could de­rail its uni­fi­ca­tion plans.

‘This is one of the most in­ter­est­ing mo­ments for buses and pub­lic trans­port,” First­Group chair­man David Martin boldly de­clared only last month. It is cer­tainly that. A £500m coro­n­avirus bailout in April kept the en­gine run­ning for a few months but now the in­dus­try is back for a sec­ond re­fuel and it’s only Au­gust.

With pas­sen­ger num­bers still at a frac­tion of pre-pan­demic lev­els, bus and tram op­er­a­tors will re­ceive a fur­ther £218m to keep them afloat, split into in­stal­ments of £27m over eight weeks, along with an ex­tra­or­di­nary pledge from the Depart­ment for Trans­port to con­tinue sup­port­ing ser­vices “un­til a time when the fund­ing is no longer needed”.

The case for min­is­ters step­ping in is pretty straight­for­ward. Buses are a vi­tal ser­vice to mil­lions of peo­ple, in­clud­ing key work­ers, the el­derly, poorer house­holds and iso­lated com­mu­ni­ties across the coun­try. Without the bus net­work, many of those peo­ple would strug­gle to get to work, buy food and get to the doc­tor.

En­sur­ing that doesn’t hap­pen is ob­vi­ously the right thing to do, espe­cially dur­ing a cri­sis of this scale. And few would ques­tion whether sup­port in some form is needed. Pas­sen­ger num­bers fell off a cliff in March as the na­tion was or­dered in­side but vol­umes have not mag­i­cally re­cov­ered since the lift­ing of lock­down. They are still be­low half of pre-Covid lev­els de­spite face cov­er­ings be­ing made manda­tory on pub­lic trans­port and so­cial dis­tanc­ing re­main­ing in place.

Op­er­a­tors have also in­tro­duced a raft of safety mea­sures, in­clud­ing rig­or­ous clean­ing regimes, and even mo­bile apps that al­low cus­tomers to check how full each bus is, and yet peo­ple clearly con­tinue to be re­luc­tant to get on pub­lic trans­port. First­Group is only op­er­at­ing at about 40pc of pre­vi­ous lev­els. That is un­sus­tain­able.

Yet, tax­pay­ers may won­der why they are the ones prop­ping up ser­vices and not share­hold­ers. Af­ter all this is a sec­tor that has en­joyed vast prof­its over the years, largely through in­fla­tion­bust­ing fare in­creases, but rather than save more for a rainy day, op­er­a­tors have cho­sen to lav­ish in­vestors with gen­er­ous div­i­dends. Be­tween 2008 and 2018, the five big bus firms Ar­riva, First­Group, Go-Ahead, Na­tional Ex­press and Stagecoach paid out an es­ti­mated £1.5bn to share­hold­ers, dou­ble what the in­dus­try has re­ceived in Covid-19 emer­gency money so far.

Tax­pay­ers may also feel ag­grieved at hav­ing to ride to the res­cue of an in­dus­try that has been con­tent to ratchet up fares while thou­sands of routes have ei­ther been cut or ser­vices with­drawn al­to­gether. The num­ber of jour­neys has been fall­ing steadily for the last six years; mileage is down; there are fewer buses on the road; us­age has also fallen; punc­tu­al­ity hasn’t im­proved; and yet last year fares went up 3.3pc on av­er­age, al­most dou­ble the rate of in­fla­tion.

It is re­as­sur­ing that the Gov­ern­ment is will­ing to step in but it is clearly do­ing so on the ba­sis that there will even­tu­ally be a re­cov­ery. Op­er­a­tors are warn­ing that it will be 2021 “at the ear­li­est” be­fore there is, but it is re­ally just one gi­ant un­known.

A more re­al­is­tic sce­nario is that the pan­demic ac­cel­er­ates the demise of a fad­ing in­dus­try, forc­ing the Gov­ern­ment to fund a vi­tal pub­lic ser­vice in per­pe­tu­ity – a sort-of un­in­tended back­door na­tion­al­i­sa­tion. Af­ter the Span­ish quar­an­tine fi­asco, Grant Shapps, the Trans­port Sec­re­tary, seems de­ter­mined to be re­mem­bered for all the wrong rea­sons dur­ing this cri­sis.

Not so fast for Unilever

Much ex­cite­ment sur­rounds the news that Unilever’s plan to scrap its out­dated An­glo-Dutch struc­ture and es­tab­lish a sin­gle head­quar­ters in Lon­don is set to com­plete in Novem­ber.

It will end a far­ci­cal saga that trig­gered a fierce in­vestor re­bel­lion and has­tened the exit of both the chief ex­ec­u­tive and chair­man af­ter Unilever tried to go the other way to Rotterdam.

Not so fast. Buried in the 122-page share­holder prospec­tus is a stark warn­ing that it could be scut­tled by a new pro­tec­tion­ist tax law pro­posed in the Nether­lands by rad­i­cal Green Party econ­o­mist Bart Snels.

Snels wants com­pa­nies that plan to leave the Nether­lands to pay the coun­try’s 15pc div­i­dend tax on prof­its that have been kept in the coun­try rather than paid out to Dutch share­hold­ers.

It would ob­vi­ously amount to an out­ra­geous raid on Unilever by Left-wing politi­cians that want to force multi­na­tion­als to re­main in the coun­try, but that doesn’t mean the law won’t be passed. Snels is on a cru­sade to change Dutch tax laws and has put for­ward a pro­posal that would elim­i­nate tax breaks on cor­po­rate losses. The ini­tia­tive could come in next year af­ter it was re­port­edly backed by the rul­ing Dutch cabi­net, hit­ting an­other UK cor­po­rate beast – Shell.

If his “Unilever tax” comes into force, the con­sumer goods gi­ant says it could re­sult in an eye wa­ter­ing exit bill of €11bn (£10bn), which would force it to shelve the en­tire process again, pre­sum­ably for good.

Alan Jope be­came Unilever chief ex­ec­u­tive last year af­ter a failed at­tempt to move its HQ to Rotterdam

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