Romney uses tax haven Netherlands to evade taxes

The Netherlands are a well known tax haven for foreign companies and investment vehicles, like the Rolling Stones. And indeed, the ‘glimmer twin’ generation does know to find Amsterdam when they want to evade taxes. Even when they try to become the president of the USA. Jesse Frederik, a Dutch journalist discovered that Mitt Romney, via the Irish company Warner Chilcott, uses the ‘Amsterdam’ tax evasion route, too. Fun fact: the ‘general partners’ of ‘Bain Capital Fund VIII’, people like Mitt Romney, provided 0,1% of the capital of this fund (equal to 3,5 million dollars). But this enabled them to reap 30% of the profits of the fund.

See the following article in De Volkskrant:

Volksk rant 5 november Romney tax evasion

reply to post by Spinoza73

A few quick questions:

1.) Is there a link to an article in English?

2.) Why is this story important?

3.) In your opinion, will stories like this end after the election? (Assuming Romney is elected.)

reply to post by Spinoza73

I don't speak Dutch, and don't have the ability to translate the article, so not much of an idea what evidence is presented.

So I'll just say, sounds about right.

Though withholding judgment until this can be verified in English.

The original research has been done bij Jesse Frederik, a Dutch journalist with a site called Follow the Money. His more extensive report (also in Dutch) can be found here.

Follow the money

I had it translated by Google, so it isn't perfect, see below.

Presidential candidate Mitt Romney dodges taxes with private equity fund Bain Capital

Bain Capital, originally founded by the U.S. presidential candidate Mitt Romney, is one of the most successful private equity funds in the world. Private equity is known for the aggressive method wherein financial hocus pocus and draconian cost not avoided. An essential ingredient for a successful private equity deal is a tax structure that ideally taxation to an absolute minimum verlaagd.Net like any self-respecting private equity fund Bain leaves no unused tax benefit. In Bain's web of trust and holding companies appear not only the usual suspects - the Cayman Islands, Bermuda, Luxembourg - Netherlands but also forms a link in the web tax. Bain, the shares of the acquired in 2004 Irish pharmaceutical company Warner Chilcott since 2010 housed in a Dutch private company. Presidential candidate Mitt Romney and Bain Capital founder also benefits from the 'Dutch route "of Bain Capital shows filings with the U.S. regulator and Romney's tax returns.

Bain Capital has already several successful deals as they sit up in May 2004 in the Cayman Islands its eighth fund founder: the Bain Capital Fund VIII. The first six funds Bain have an impressive return of 82 percent achieved as reflected Bain in a memorandum to potential investors for. More than 300 investors, including U.S. pension funds, provide the seed capital of $ 3.5 billion for the Cayman Islands-based fund.

Mitt Romney and his wife are also involved. They do not invest along with the regular investors, but with the partners of Bain. Romney left Bain Capital in 1999 for the Olympic Games in Salt Lake City to organize. As part of his severance Romney may still benefit from Bain deals to 2009.

The Bain Capital Fund VIII has two forms of 'shares': limited partnership interests and general partnership interests. The limited partners (regular investors) bring almost all the seed into. The general partners (Partner of Bain including Romney) made ​​only $ 3.5 million in. But although the partners of Bain only 0.1 percent of the capital to make them claim to provide 30 percent of the profit of the fund, private equity concepts even for a large reward (the standard is 20 percent).

The privilege as a partner of Bain allowed to extend the benefits delivers huge returns. Although partners were brought in only $ 3.5 million profit participations from September 2010 $ 695 million worth. A yield of 19.750 percent in six years.

This 'golden handshake' also provides tax benefits for Romney. On normal income Americans pay 35 percent tax on "capital" only 15 percent. Since his departure arrangement is not paid in the form of a salary, but as profit-sharing, the wealthy Romney pays a lower tax rate than many other American.

Made in 2004, Bain Capital and a consortium of private equity funds, the Irish pharmaceutical company Warner Chilcott of the fair . The consortium set up a company in Bermuda that Warner Chilcott will take over. The acquisition cost is more than $ 3.15 billion, of which the consortium contributes 1.2 billion and 2 billion borrows. The debt end up in the Bermudian company and must therefore ultimately, as is usual in private equity, be expelled by Warner Chilcott itself. At the end of the ride, Bain has an interest of 21.2 percent in the Irish producer of vaginal creams and contraceptives.

The majority of the shares of Warner Chilcott is housed in the Bain Capital Fund VIII. Of the 37.5 million shares Bain in September 2010 in his possession, the Capital Fund VIII, more than 25.7 million, according to a earlier this year by tech blog Gawker leaked Quarterly fund. Warner Chilcott is a highly successful investment. In September 2010, the market value of the shares at $ 576 million, while according to the quarterly once only $ 103 million was paid for the shares.

End of 2006, Warner Chilcott back to the fair . The IPO provides over one billion. The debt is reduced, but also pays Warner Chilcott $ 354 million to the consortium. Shares will be redeemed and management fees paid. They are the first revenues for Bain and their partners. The real benefit, however, will only come later. Bain is patient.

In May 2009, the management of Warner Chilcott announces that she intends to move from Bermuda to Ireland. Following the announcement by President Obama to notorious tax havens such as Bermuda harder to tackle. Ireland does not fit in the row Cayman Islands, Bermuda, Panama, but nevertheless an attractive fiscal business climate as also recognizes the management of Warner Chilcott. "Ireland has a stable legal and regulatory framework in the long term 'and' a robust network of tax treaties' allows management an explanation on its plans.

After the big move of Warner Chilcott also changes Bain Capital its structure in August 2010 the shares of Warner Chilcott grouped in a Dutch private company. Alter Domus , a company that "administrative services" performed for "multinational corporations and alternative investment funds' , provides the drivers.

The Netherlands is chosen as the location for its tax specialty: the participation exemption . As a Dutch company more than five percent of the shares in another company persists then there is no need to pay tax on all income from those shares (dividends or profits on the sale of the equity interest). Combined with our extensive network of tax treaties, this potentially large tax benefits. 'The Netherlands is the world champion participation exemption, "said Jos Peters tax of tax consultancy Merlyn.

If Warner Chilcott would pay immediate dividends to Bain partnership in the Cayman Islands is 20 percent withholding tax levied in Ireland. However, if dividends are paid to a Dutch company in Ireland, one is exempt from withholding tax. The Dutch tax levy, by the participation exemption, no dividend so that the dividend from Luxembourg to flow through to the sunny beaches and unloaded at the Cayman Islands. The same applies to capital gains on shares - buy ten, selling for twenty - which also remain unloaded by the participation exemption, Irish-Dutch treaties and EU directives.

Most of the gain on the acquisition of Warner Chilcott in the past two years passed. A month after Bain its shares in the Netherlands has placed Warner Chilcott announced a special dividend of $ 8.50 per share. To this extensive benefits totaling $ 2.15 billion to pay Warner Chilcott is $ 2.25 billion of new debt to. A similar benefit takes place two years later. In September 2012 will Warner Chilcott again a special dividend of $ 4 per share (cost $ 1 billion). For this lends Warner Chilcott another $ 600 million. One week after the last distribution sales Bain and their private equity partners, about half of their shares in Warner Chilcott.

Bain since 2010 389 million dollars in dividends richer (and Warner Chilcott 2.85 billion in debt). Bain has the 'Holland route "at least 77 million to Irish dividend withholding tax saving confirms Jos Peters who also advises major private equity funds. Since the shares of Warner Chilcott in the Netherlands are housed, Bain furthermore also for $ 334 million of shares sold. "Bain also saves a lot of Irish capital gains tax if the shares are sold," said Peters.

How Romney and his wife have just invested in Bain Capital Fund VIII is unknown. In 2006, their shares in any case 'over one million' worth according to the 'public financial disclosure report " that Romney in his campaign in 2008, deposit with the American electoral college. Since then the value only increased further. The tax returns of Romney and his wife that they in 2010 and 2011 a total of over $ 2,050,000 in dividends received. Their shares in the fund names in the same period by more than 5.5 million in value.

Romney gets at least a portion of its proceeds in shares. On 10 March 2011 gives Romney 19,799 shares of Warner Chilcott (worth about $ 450,000) to a non-profit of his son, The Tyler Foundation. Same day reports Bain Capital in the U.S. regulator has done that she shares with its partners in connection with "charitable donations". Because of its shares to a charity to donate need Romney in the United States no tax to pay on the capital of its shares. Moreover, Romney's charitable donations are tax deduct.

The Tyler Foundation, the charity of Romney's son, had in 2010, $ 10 million in assets. The foundation donated since its existence is by far the most to the Mormon church. (If Romney is a Mormon informal obligation about 10 percent of his income to the church to pay.) A close second was Brigham Young University, Romney's old university, but also the George W. Bush Library scores high with a donation of $ 100,000 in 2010.

Curiously, Romney failed his donation to The Tyler Foundation to deduct from his taxes. Reason being, as Brad Malt, the trustee of his assets recognized , which in August 2012 Romney claimed he never less than 13 percent tax was paid. If Romney had his donations are deducted, he was among the 13 percent limit reached. Romney does, however, not to worry. He has another 3 years time as to have his tax return for 2011 to correct.

reply to post by charles1952


In a nutshell:

* The Netherlands are one of the fiscal back doors Romney has used to evade taxes.
* The private equity fund, Bain Capital, Romney participates in has evaded 80 million euro dividend taxes.
* Romney, according to the article, created Bain Capital as part of one of many such funds in a web of different funds which can be traced back to the Cayman Islands, Bermuda and Luxemburg.
* Even though Romney officially quit Bain in 1999, he is still allowed to participate in the fund as a deal he struck upon his departure. He, along with his wife Ann Romney, have invested in Bain Capital Fund VIII which is located on the Cayman Islands and has an active interest in Warner Chilcott.
* From the 37,5 million shares Bain has in Warner Chilcott, 25,7 million shares are registered in Bain Capital Fund VIII.
* Romney declares in his public financial disclosure report his stake in Bain Capital Fund VIII to be worth more than 1 million $.
* From both his and his wife's tax returns it is estimated that from 2010 to 2011 they received 2.05 million $ in dividend form the fund. Their shares, during the same period, increased in value to the tune of 5.5 million $
* Romney donated, on March 10th 2011, 19.799 shares (worth 450,000 dollars) form Warner Chilcott to a non-profit organization registered under the name of his son, The Tyler Foundation. He not only evaded taxes this way but gifts can be deducted from taxes in the States.

reply to post by VariableConstant


I am dutch (so I am from the Netherlands) and just read on the Volkskrant article, a dutch qality paper.

Here is the translation I have made for you with the help of google translate:

Romney is evading taxes through dutch shortcut


The tax loopholes of Mitt Romney also run through the Netherlands. The private equity fund Bain Capital, which presidential candidate participates in, have dodged some 80 million euros in dividends via the Netherlands shortcut.

Presidential candidate Mitt Romney is benefiting from the private equity fund Bain Capital from an advantageous tax route that runs through the Netherlands. The Netherlands is for the American Bain, which was established by Romney a link in his extensive international web of trusts and holding companies.

Bain knows how to avoid paying dividends and capital taxes by routing the investments made in the in 2004 acquired Irish pharmaceutical company Warner Chilcott via the Netherlands. Since the shares are based in the Netherlands, approximately $ 389 million (303 million) in dividends were paid by Bain and sold for over $ 334 million (260 million euros) in shares.

This shows by Follow the Money (a dutch economic magazine) for the Volkskrant examined filings with the U.S. Securities and Exchange Commission (SEC), Romneys tax returns, the U.S. tech blog Gawker revealed confidential documents from Bain, and data from the Dutch Chamber of Commerce.

80000000
According to taxspecialist Jos Peters, who advise large private equity firms occurs, Bain managed to dodge with the Dutch route about 80 million. "Bain also saves a lot of Irish capital gains tax if the shares are sold," said Peters. Bain nor the Romney campaign has responded to repeated requests for a comprehensive response.

While Romney left Bain in 1999 as an active investor, he was there as part of his severance scheme still participating. So he invested in 2004 with his wife Ann Romney also in the Bain Capital Fund VIII. This in the Cayman Islands based fund has a significant interest in Warner Chilcott. Of the 37.5 million shares that Warner Chilcott Bain in September 2010 in its possession, there are 25.7 million in the Bain Capital Fund VIII.

Romney, in his' public financial disclosure report "that his shares in the Bain Capital Fund VIII are worth 'over a million'. From the tax returns of Romney and his wife that the couple in 2010 and 2011 gave, more than $ 2.05 million in dividends is received from the fund. Their shares rose in the same period by more than $ 5.5 million in value.

Romney receives a significant portion of the proceeds from the Bain Capital Fund VIII in the form of shares. On March 10, 2011 Romney donated 19,799 shares of Warner Chilcott (with a market value of approximately $ 450,000) to a non-profit association of his son, The Tyler Foundation. This avoided Romney taxation in the United States. Gifts of shares to designated non-profit organizations are excluded from capital gains tax. Moreover, the gift tax is deductible.

$ 398 million
Since 2010, Bain Capital has its shares in Warner Chilcott housed in a Dutch private company. From the beginning, there are significant benefits occured to Bain Capital. Warner Chilcott paid from August 2010 389 million dollars in dividends. Bain sold in these years for more than $ 334 million equity Warner Chilcott.

By making use of the so-called participation exemption in the Netherlands and Luxembourg, Bain avoid the proceeds of dividends and capital gains taxes and safely bring the revenues of its shares in tax haven Cayman Islands. The participation exemption means that the profit from a shareholding of more than 5 percent is not taxed in the Netherlands. That is partly why the Netherlands is an attractive location for holding companies of multinationals and financial funds. "We are world champions participation exemption ', says Jos Peters, tax specialist at Merlyn.

In the United States, Mitt Romney is for months under fire from the media and his political opponents of the Democratic Party on the limited amount of his tax payments. The criticism forced Romney in September to reveal about the tax paid by him.. It was already known that he benefits from tax ingenious shortcuts through the Cayman Islands, Bermuda and Luxembourg.

Netherlands came in that list not yet. Wrongly, it turns out.
Netherlands came rather as attractive tax junction in the news with the shortcut tax of U.S. coffee chain Starbucks, which in England stirred great indignation.

Read a full story of Jesse Frederick of Follow the Money on the Dutch tax route of Bain Capital in Follow the Money.

The link of that story is here, www.ftm.nl...

Which is offcourse written in dutch, because this is the article from a dutch economic magazine.

reply to post by Marceline


When I was busy translating the Volkskrant article, someone has posted the translation from the Follow the money article, even better.

Why do people get so surprised that rich people have good accountants and know the loopholes?

I'm not surprised and it was known Romney uses other tax heavens like the Cayman's to evade taxes. This particular case concerning the Netherlands was new to me. If you hate taxes and admire banksters, Romney is your man.

Thats why taxes have to be kept as low as possible...to attract money, to attract business, to attract wealth for all.

reply to post by Skyfloating


This would seem to make sense, but the truth is that - if we use the past as any measure - we see no enormous correlation between periods of growth and drops in taxes; at least, we see no reason to attribute a causal relationship right off the bat.

I do think however that too much tax can inhibit companies moving over, but it is only one variable in a huge number which managers take into consideration when deciding whether to keep open an office/branch or open a new one.

I had honestly never heard of the Netherlands being a 'tax haven', but I do know that, when it comes to business and industry, they try to be a bit more laissez-faire like the Brits (it sounds odd, I know, but Parliament, at least historically, has tried to avoid stepping on the toes of industry, since commerce and business have been so inextricably central to the development of our nation).

I should also ask by the way - is it the actual NL that is the 'tax haven' (presumably by which is meant the place of incorporation or where a company is registered)? or is it its caribbean colonies?

reply to post by Spinoza73


There may be this loophole for foreign companies, but for the citizens, the Netherlands is far from a tax haven.

Originally posted by duality90
reply to post by Skyfloating

 

I should also ask by the way - is it the actual NL that is the 'tax haven' (presumably by which is meant the place of incorporation or where a company is registered)? or is it its caribbean colonies?

The Netherlands, not the carribean islands. And they are only a taxhaven for foreign companies. Not for us.

reply to post by duality90


Yes, it is actually The Netherlands in Europe. A couple of years there was a little row when we (decent country) appeared on a list of the biggest tax havens and Obama mentioned The Netherlands. Our government officially complained about it (sort of), but it is definitely true, even though they tried to play it down. Many multinationals use our special low tax regime, for a total amount of 12,300 billion euro's a year.

Netherlands tax haven