Some 90% of the €2.9 billion tax break given to innovative companies in the Netherlands last year has gone to chip machinery maker ASML, pharmaceuticals firm MSD, and online travel agency Booking.com, according to research by the Financieele Dagblad and Trouw.
MSD, which is a US company, has largely stopped all its research activities in the Netherlands, raising questions about the tax advantage it has been given, the FD said.
The aim of the “innovatiebox” is to stimulate companies to carry out R&D in the Netherlands.
MSD, known as Merck in the US, was given a tax break totalling €922 million last year and has been able to cut its tax bill in the Netherlands by some €4 billion since 2019. This is largely down to Keytruda, an anti-cancer medicine originally developed in the Netherlands and which booked sales of some €27 billion last year, the paper said.
MSD closed its Oss-based research division, where Keytruda was developed, in 2016 and has since shifted production to Ireland. The company does retain a research arm for animal health in Boxmeer.
Much of the Keytruda income is channelled through the Netherlands because the patent is held by a Dutch limited company which collects worldwide royalties. MSD only pays 9% corporation tax on this company, rather than 25%, because of the “innovation box” ruling with the tax office.
“This is absolutely not what the innovation box is meant for,” tax law professor Jan van de Streek told the FD. “We don’t have the laboratories, the high-value jobs and the investment that we want. The fact that we are taxing this company’s global income at a lower tariff is doing nothing for our investment climate.”
The government’s macro-economic forecasting agency CPB and the scientific council for government policy WRR have also criticised the way the tax break has largely benefited successful, well-established companies, Trouw said.
Nevertheless, the CBS said in 2023 that 2,700 companies were benefiting from the tax break – most of them small firms.
Reactions
MSD told the FD in a reaction that the tax discount has been applied to a string of products and has been agreed with the “relevant authorities”. The company still has almost 4,000 workers in the Netherlands, the spokesman said.
The finance ministry said in a reaction that an evaluation of the system had shown that it largely achieved its aims, and the current government has said it will continue with the tax break.
MPs from opposition party Progressief Nederland told Trouw they planned to ask ministers for an explanation.
