Dividend tax loophole costs the Netherlands over 2.2 billion euros per year

According to SOMO’s calculations, the cost to the Dutch economy of a tax loophole through which companies buy back their own shares is at least 2.2 billion euros annually, more than twice as much as the latest CPB estimate of 1.0 billion euros presented in their Keuzes in Kaart 2027-2030(opens in new window) projection. Share buybacks by large listed companies are much larger and more structural than the CPB and the Ministry of Finance had previously assumed.

When a company buys back its shares, it repurchases them from the stock market and withdraws them, thereby reducing the number of outstanding shares and increasing earnings per share. This benefits existing shareholders because the ones who sell their shares receive money directly from the company, while the other shareholders passively see the value of their shares increase. It is also very favourable from a tax perspective, as this payment to shareholders is virtually untaxed. Since 2001, the Dividend Tax Act(opens in new window) has made it possible to pay out four times as much tax-free through share buybacks as through dividends.

In this study, we show that the CPB and the Ministry of Finance, which coordinates the main components of the estimation method, greatly underestimates the lost revenue from the loophole because fundamental assumptions are incorrect. This is largely due to the limited data available to the CPB, which relies on data compiled by the media outlet Financieel Dagblad (opens in new window) in 2023. SOMO, on the other hand, has compiled a much more accurate dataset of all listed companies based in the Netherlands over a much longer period, using data from the London Stock Exchange Group (LSEG, see methodological appendix). In doing so, we map out how much money was channelled to shareholders via dividends and share buybacks, how this ratio shifted over the years, and how the Netherlands compares to other European countries. 

There are three reasons why the CPB underestimates the lost revenue from this loophole.

1. Underestimation of the growth and size of share buybacks in the Netherlands

For its report, Keuzes in Kaart 2027-2030(opens in new window) , the CPB bases its calculations on a 2023 analysis by the Financieel Dagblad(opens in new window) covering the period from 2013 to 2023. The CPB assumes that share buybacks are linked to economic cycles and, therefore, it takes the average over this period to correct for cyclical effects on share buybacks. However, an analysis over a longer period, from 2000 to 2024, shows that companies have been buying back more of their own shares on a structural basis since 2020. As a result, data from 2013 to 2020 does not provide a reasonable basis for predictions regarding share buybacks in the coming years. In fact, even in 2023 and 2024, years of low economic growth, share buybacks have remained at a high level, indicating that this is not primarily a cyclical but a structural phenomenon. Therefore, the average from 2013 to 2023 is not representative of the coming years until 2030. Rather, the recent period from 2021 to 2024 provides a more realistic picture of the structurally higher level at which share buybacks are currently occurring.

This becomes clear when you look at the figures from 2000 to 2024, which show how Dutch listed companies have experienced significant growth in share buybacks (Figure 1). While dividends more than doubled, from 11 billion in 2000 to 26 billion in 2024, share buybacks grew by a factor of five, from 5 to 25 billion euros in the same period. The relationship with growth of the Dutch gross domestic product (GDP) is visible in the period 2004 to 2008 (before the financial crisis), but after the Corona crisis (in 2023 and 2024), there appears to be a decoupling, with share buybacks continuing despite low economic growth.

From a European perspective, the Netherlands has become the frontrunner in share buybacks between 2021 and 2024, with a total of 102 billion euros in buybacks. This is more than in France (89 billion) and Germany (76 billion), even though the Dutch economy is considerably smaller.

This leading position is also related to how Dutch companies distribute their profits. At the turn of the millennium, the vast majority of profit distributions in the Netherlands were still made through dividends (Figure 1), but now almost half are made through share buybacks (49 per cent). This share remains considerably lower in France and Germany, at 24 and 19 per cent respectively. Only in Ireland are share buybacks relatively more popular, at 55 per cent (Figure 3).

Looking at the period from 2000 to 2024, we see a fundamental shift in share buybacks, one that is structural in nature. Given this shift from dividend payments to share buybacks, it is therefore more logical for the period 2027 to 2030 (on which CPB’s Keuzes in Kaart focuses) to assume the recent, higher level of share buybacks by Dutch listed companies. Reducing share buybacks to the average level between 2013 and 2023 would mean that companies would forego a tax advantage and a practice that has become ingrained. As the following point shows, there are strong structural reasons why this seems highly unlikely.

2. Buybacks have become structural, not ad hoc

In its analyses, the CPB assumes that share buybacks only occur on an ad hoc basis, mainly in good economic times and when there are surplus profits. However, the figures paint a different picture. Listed companies now make structural use of share buybacks, often through multi-year programmes. 

Dutch State Secretary Marnix van Rij also defended the tax exemption in 2023(opens in new window) by arguing that share buybacks were only “ad hoc” in nature and would only be used for “surplus profits.” The Ministry of Finance reiterated this position in 2024(opens in new window) , without providing any substantive justification, adding that share buybacks would mainly increase in “good economic times” and decrease in “bad economic times“.

In the past, companies indeed often used share buyback programmes when they had surplus cash, for example, after selling a large part of the company. Wolter Kluwers sold(opens in new window) its education division(opens in new window) in 2007 and could buy back shares worth 645 million euros (Figure 5a). However, if you look at the past five to ten years, you will see that listed companies now seem to be making structural use of share buybacks. This pattern is visible in a wide range of companies: Ahold Delhaize (supermarket), ING (bank), NN Group (insurer), Wolters Kluwer (publisher), and NXP Semiconductors (chip manufacturer). Their annual accounts show that share buybacks are now a recurring feature, in combination with the payment of dividends. Share buybacks are not an ad hoc measure, but an integral part of the profit distribution policy for Dutch listed companies (see Figures 4a to 4e).

Previous SOMO research has shown that an important reason for this institutionalisation lies in the way directors are remunerated, which also explains why share buybacks are so common. Directors of listed companies are increasingly being remunerated with shares that they receive as a bonus when certain conditions are met. A common condition is how much profit a company makes per share. Share buybacks increase earnings per share simply because the distributed profit is divided among fewer shares. Linking an increasing proportion of directors’ income to conditions of this kind has been promoted by US investors(opens in new window) over the past 25 years.

At Ahold Delhaize(opens in new window) and Wolters Kluwer(opens in new window) , for example, 25 and 30 per cent of the multi-year bonus depends on earnings per share. This creates a direct incentive for directors to use share buybacks on a structural basis. It not only increases the tax-free distribution to shareholders, but also the personal remuneration of directors. For example, Ahold Delhaize’s share buyback programme earned CEO Frans Muller an additional bonus of 864,208(opens in new window) euros in 2024 because earnings per share exceeded the set targets as a result of the share buyback. Nancy McKinstry, CEO of Wolter Kluwer, received a 1.3 million(opens in new window) euro bonus in 2024 because the earnings per share target was achieved (30 per cent of the 4.3 million euro multi-year bonus in 2024 was due to the earnings per share target being achieved).

This shift towards share buybacks is also reflected across the board. The proportion of Dutch listed companies with a buyback programme has doubled from 17 per cent in 2000 to 42 per cent in 2024 (Figure 5).

This completes a mutually-reinforcing cycle. The government subsidises share buybacks through tax exemptions, and the remuneration system for directors reinforces the incentive to use buybacks on a structural basis. It is not an ad hoc measure, but a permanent mechanism that benefits both shareholders and directors financially. Furthermore, this remuneration structure cannot simply be abolished. It is a globally widespread system that is deeply embedded in how top remuneration is structured. It also means that taxing share buybacks does not automatically lead to a shift towards dividend payments (or similar instruments such as Second Trading Line, which are already taxed or could be taxed, as the Dutch Ministry of Finance assumes. The incentive to buy back shares remains strong and will continue to exist because it is directly linked to the personal remuneration of directors.

3. Underestimation of the number of foreign shareholders

As described by SOMO last year, the CPB and the Dutch Ministry of Finance base their analysis on the assumption that half of the shareholders are foreign. If you look at the underlying data of Dutch listed companies, a completely different picture emerges, and you see that there are significantly more foreign shareholders.

This is important because, in practice, the tax exemption for share buybacks mainly benefits foreign shareholders. After all, Dutch shareholders can offset their dividend tax against income or corporation tax. In contrast, foreign shareholders often do not have that option (with the exception of certain countries with tax treaties, such as specific pension funds in the US(opens in new window) ). And if they can offset, they often can only do this in their own country and not in the Netherlands. 

LSEG data shows that the number of foreign shareholders in Dutch-listed companies has risen rapidly over the past ten years (Figure 6). This data is derived from public reports by funds, larger shareholders or AFM notifications. Since 2014, the LSEG has been able to identify 60 per cent or more of the owners; in 2024, this percentage was 65.2 per cent. The figures show that in 2014, only 38.4 per cent of the shares in Dutch listed companies were in foreign hands, which increased to 55.7 per cent in 2024. On the other hand, the share of companies with Dutch shareholders declined slightly from 15.1 per cent to 9.5 per cent over the same period.

SOMO previously researched the growing influence of major US asset managers BlackRock, Vanguard, State Street and Fidelity Investments. Today, they are among the largest shareholders in virtually all Dutch listed companies: together, they manage 11.8 per cent of the companies listed on the Amsterdam stock exchange. That is more than ten times as much as the five largest Dutch shareholders, who together represent only 0.9 per cent.

Attracting multinationals

In 2023(opens in new window) , the Dutch House of Representatives passed an amendment to scrap this tax benefit for foreign shareholders. The proceeds would be used to increase the minimum wage and child tax credit. In 2024(opens in new window) , the then-active cabinet decided to maintain this tax exemption after all. 

This meant that share buybacks remained an instrument to attract multinationals. Illustrative of this is a letter(opens in new window) from Minister Dirk Beljaarts to Unilever in 2024. In it, he outlines an attractive business climate with tax relief and tax advantages. “The facility to purchase own shares will no longer be abolished,” he wrote to CEO Hein Schumacher. 

This fits in with a broader tradition of years of lobbying by multinationals. As early as 2017, there was a great deal of commotion surrounding dividend tax when SOMO’s freedom of information request exposed years of lobbying against dividend tax. Prime Minister Rutte’s infamous “disappeared text message” to Unilever CEO Paul Polman showed how far the government was willing to go. Rutte promised to push for the abolition of dividend tax, a measure that would cost(opens in new window) the treasury 1.4 billion euros(opens in new window) annually. That moment became symbolic of how cabinets use tax breaks to appease multinationals, without any demonstrable benefit to citizens, but at the expense of democratic control and transparency.

Letterbox companies

The government defends(opens in new window) the exemption as an indispensable tool for attracting multinationals. In reality, companies determine their location primarily based on factors such as knowledge, infrastructure, labour market, legal system and access to capital. 

In 2024, approximately 8 per cent of Dutch listed companies had few material ties to the Netherlands, but accounted for 32 per cent of share buybacks. Examples include companies such as Stellantis(opens in new window) (French-Italian car manufacturer), Davide Campari Milano NV(opens in new window) (Italian beverage producer) and Ferrovial SE(opens in new window) (Spanish infrastructure), which are based in the Netherlands without significant production facilities.

In short, there are letterbox companies that seem to choose the Netherlands because of tax loopholes, not because of real economic involvement. But what does the Netherlands gain when these structures ‘settle’ here, while the treasury loses billions from companies that do have real activities here? Even if the tax exemption on share buybacks were to attract new companies, society would hardly benefit from it.

Elections

Share buybacks are tax-efficient in the Netherlands and have become a structural instrument. The government presents this as a conscious choice to create an attractive business climate, which companies can apply at will. In practice, this has led to companies paying out profits en masse through share buyback programmes instead of dividends. As a result, foreign shareholders systematically pay less tax than they would if dividends were paid out. While the state is struggling with a budget deficit and facing major expenditure in the coming years, the Netherlands is sticking to this tax exemption.

Other countries have already taken the plunge: in the United States(opens in new window) , a one per cent tax on share buybacks has been in place since 2023. France(opens in new window) introduced an 8 per cent levy in 2025 for companies with a turnover of more than 1 billion euros. Switzerland(opens in new window) has been levying a tax on the repurchase of shares (35 per cent on the added value) since 1997, mostly carried out by Second Line Trading. These countries recognise that share buybacks give shareholders a tax advantage and cost public funds. 

The Netherlands, on the other hand, has deliberately opted for a tax exemption. In doing so, the government is protecting multinationals and foreign shareholders at the expense of public funds for ordinary citizens. Corporate profits and executive pay continue to rise, while more and more households are feeling the pressure of higher prices and a growing gap between work and wealth.

Calculations based on the political programmes for the 2025 elections show that most parties, such as the VVD, CDA, and D66, want to maintain the exemption. Only Groenlinks-PvdA, ChristenUnie, and Volt want to abolish it. The tax benefit of 2.2 billion euros per year is, therefore, not a detail of budgetary technique, but a political choice that voters will soon be able to vote on.