CAPE TOWN - When Steinhoff listed in Frankfurt in 2015, it was, in fact, a Dutch company that was listed on the stock exchange. That is also why the auditors changed from Deloitte in South Africa to Deloitte in the Netherlands. Steinhoff’s head office is in Stellenbosch, and the company is managed from there. However, its primary listing is in Germany and Steinhoff’s officially registered address remains in the Netherlands.
"The reasons for this are complicated and should be scrutinised,” said James-Brent Styan in his book: Steinhoff: Inside SA’s biggest corporate crash.
The question then is, what other companies conveniently registered their head offices in the Netherlands, and why?
I spoke to James yesterday, discussing this very intriguing, almost secret tax avoidance and evasion corporate trick.
“Off the 20 largest companies on the JSE today, 14 have one or more registered subsidiaries in the Netherlands. The largest company on the JSE, Naspers, recently moved its head office to the Netherlands”, said Styan.
Considering Steinhoff’s tax obligations over the years, it seems that there is more to this than meets the eye. Fact is: Steinhoff saved billions by declaring its revenues in the Netherlands and other countries. Another method that was applied by this particular group is tax arbitrage, a process by which companies (ab)use different tax rules in different countries to their advantage.
“And this is where Steinhoff’s European subsidiary, Steinhoff Europe, crops up. This company is registered in Australia, although Bruno Steinhoff hails from Germany. The reason is simple: Its about tax arbitrage”, says a source with insider knowledge.
It gets even better: estimates are that there are 14 000 shell companies in the Netherlands. According to Styan, research undertaken by Corpnet, a group affiliated with the University of Amsterdam, has found that the Netherlands is one of the world’s major role-players in moving money to tax havens.
The IMF says the Netherlands has the most substantial investment flow globally – greater than much larger countries with much larger economies such as the US, China and Germany. The reason for this, among other “things”, is the profusion of shell companies.
Did you know that the Netherlands and the United Kingdom are transit countries, through which most of the money flows to tax havens such as Luxembourg, Hong Kong, the British Virgin Islands, Bermuda, Jersey and the Cayman Islands?
“To illustrate the importance of such flows, the British banking group HSBC consists of at least 828 legal corporations in 71 countries,” Styan explains. “The largest brewery in the world, which took over SABMiller in 2016, is Anheuser-Bush InBev (AB-InBev), which consists of 680 companies in 60 countries. Between 2007 and 2009, Google moved most of its profits earned outside the US ($12.5 billion) to Bermuda, via companies in the Netherlands. Google consequently paid an effective tax rate of only 2.4 percent.”
There is a major difference between tax avoidance and tax evasion: the former is legal and the latter is a criminal offence. In South Africa, the corporate tax rate is 28 percent. This simply means that if a company makes R100 profit, R28 must go to the taxman. Companies try to keep this percentage as low as possible in two ways – using the services of tax specialists and by setting up complex corporate networks, including foreign registrations and listings.
“The smarter the tricks and the more daring the stunts, the finer the line between avoidance and evasion”. – James-Brent Styan