Tobacco group British American Tobacco (BAT) evaded taxes in the Netherlands from 2014 to 2016, including by deliberately excluding a profit of almost 1.7 billion euros from tax returns. The North Holland court in Haarlem made this decision last Friday judged.
BAT now has to pay profit tax on a profit of more than 1.8 billion euros, which would amount to an additional tax of around 450 million euros. The judge also ruled that the Tax Authorities rightly imposed a fine of 106 million euros on the tobacco company, according to the judgment.
The tobacco company calls it “a disappointing statement.” According to a spokesperson, BAT is considering appealing the verdict. BAT has always denied having evaded taxes in the Netherlands.
Profit tax
British American Tobacco is one of the largest cigarette manufacturers in the world, with a turnover of almost 28 billion pounds (32 billion euros) in 2022. A large part of global income flows through Dutch companies to the parent company in the United Kingdom. The group has been in conflict with the tax authorities for several years about the profit tax that the company must pay in the Netherlands.
The Tax Authorities previously claimed in court that BAT channeled a total of more than 4 billion euros in income via the Netherlands to its parent company in the United Kingdom, without paying tax on it. According to the tax authorities, this should have been the case.
The case in which the North Holland court ruled on Friday concerned the tax years 2014, 2015 and 2016. BAT filed a negative tax return in those years. It indicated that a loss had been made, which meant that the company did not have to pay tax for the year in question and that a compensable loss arose for later years.
Company abroad
According to the judges, BAT used various methods to artificially reduce profits in the Netherlands and thus evade taxes. For example, a Dutch BAT company paid costs to an affiliated company abroad, so-called factoring fees, which, according to the court, “must be qualified as a whole as non-businesslike”. According to the court, BAT could have known that by increasing these costs “too little corporate tax would be levied”.
In a similar way, Dutch companies paid more bills to sister companies abroad. On paper, this involved costs for guarantees, assistance with cost savings and compensation for services related to the production of cigarettes. But according to the court, these costs were in reality mainly intended to reduce profits in the Netherlands.
In addition, BAT decided in 2016 to transfer part of its Dutch activities to a company in the United Kingdom. According to the court, this transfer provided the Dutch branch with a profit of 1.7 billion euros, which BAT wrongly did not report to the tax authorities.
The Tax Authorities are “satisfied” with the court’s ruling and currently see no reason for an appeal, a spokesperson said in a response.
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