The group flees to Great Britain.
(Photo: AP)
The oil company Shell leaves the Netherlands and relocates its sole headquarters to London. In Great Britain, the move is celebrated as a vote of confidence in how attractive the location will still be after Brexit. It’s not that simple, however.
The decision of the oil multinational has a lot to do with its previously far too complex corporate structure, which makes it difficult for the changing company to keep its shareholders happy with share buybacks and high dividends.
However, Shell’s move is a warning for the Netherlands in particular and the EU in general. It is now becoming apparent that the international tax competition of multinational corporations is far from over even after the global agreement on a minimum tax for companies.
Shell is the second major corporation after Unilever to sacrifice its Dutch-British tradition for a sole location in London. As with the consumer goods giant, the 15 percent withholding tax on dividends plays a decisive role at Shell, which is in the Netherlands but not in Great Britain.
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The group’s coffers overflow after Shell sold parts of the company to Conoco Phillips for seven billion dollars and wants to part with other assets from the oil sector in the course of its transformation.
In order to be able to return the idle capital to the shareholders, Shell now wants to streamline its group structure and only pay taxes and dividends in Great Britain. This not only reduces the tax burden, but also increases the scope for distributions to shareholders – be it through buybacks or dividends.
Damage to the image of the Netherlands as a location
For the ruling government of Prime Minister Mark Rutte in The Hague, Shell’s escape is more than just an “unpleasant surprise”. The damage to the image of the Netherlands, which is also advertising with tax advantages, is enormous. It is true that Rutte is now trying at the last minute to abolish the controversial dividend tax. But that already failed in 2017.
One can assume that the increasing criticism of Shell activists also played a role in the move. At the urging of environmental activists, a court ordered the group to significantly increase its pace in reducing emissions.
It is doubtful whether Shell will manage to escape pressure from its own shareholders with higher distributions. For example, US investor Daniel Loeb and his third point hedge fund are pushing for the group to be split up into one part for renewable and one part for fossil fuels.
More: Shell reorganizes its share structure – Great Britain becomes new headquarters