Dutch tax dodge for Mitt Romney?

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We’ve had the Cayman Islands, Bermuda and Luxemburg. Now there’s a new name to add to the growing list of countries that US presidential hopeful Mitt Romney allegedly uses to dodge taxes: The Netherlands.

According to an investigation by the website Follow the Money and the Dutch daily newspaper de Volkskrant, Romney has made millions of tax-free dollars through the private-equity company he established in 1994—during his pre-political days--Bain Capital.

Although Romney stepped down from Bain in 1999, he and his wife were reportedly still allowed to invest in the company until at least 2009, and were still reaping the benefits in 2010 and 2011.

And as part of his so-called “golden handshake,” the investigation says Romney got a severance deal that paid him in capital gains rather than salary, meaning the taxes he had to pay were significantly lower.

How it works

The story goes like this: In 2004, Bain acquired the Irish pharmaceutical company Warner Chilcott, which was originally registered in Bermuda but moved to Ireland in 2009 to avoid President Obama’s crackdown on Bermuda’s lax tax rules.

Then two years ago, Bain registered its interest in Warner Chilcott with the private Dutch company Alter Domus, which provides administrative services for multinational corporations and investment funds. If a Dutch company owns more than five percent of the shares in another company, than that other company is exempt from paying taxes on all capital gains. 

Through exemptions like that and a host of other complicated tax treaties, the Netherlands offers huge tax breaks to companies like Bain, which is reported to have evaded 80 million euros in dividend taxes by running through the Netherlands.

Dutch tax haven

“The Netherlands is the world champion of participation exemption,” Jos Peters of tax consultancy firm Merlyn told Follow the Money.

By examining Bain’s filings with US regulators, Dutch Chamber of Commerce documents and those made public by Gawker, and even Romney’s own tax returns, Monday’s report says Romney has been able to financially benefit from the “Dutch route” as well.

The investigation says that there is a discrepancy between Romney’s tax filings and the tax-exempt Warner Chilcott shares he donated to his son’s charity in 2011, worth about $450,000.

The Tyler Foundation donates most of its money to the Mormon Church, of which Romney is a member.

Both Bain and Romney have refused repeated requests to comment on the issue.