Romney Evades Taxes Via Shortcut Through Netherlands

This article appeared originally in the Dutch journal Volkskrant. Translation by The Dubya Report

Mitt Romney's tax loopholes also run through the Netherlands. The private equity fund Bain Capital, in which the presidential candidate participates, may have hidden some 80 million euros in dividends by routing them through the Netherlands.

Presidential candidate Mitt Romney profits by way of the private equity fund Bain Capital from an advantageous fiscal path that runs through the Netherlands. For the American firm Bain, which Romney established, Netherlands served as a link in an extensive international web of trusts and holding companies.

Through its investment in 2004 Bain acquired Irish pharmaceutical company Warner Chilcott which was run via the Netherlands to avoid dividends and capital gains taxes. While the shares were housed in the Netherlands Bain realized $389 million (303 million) in dividends and sold shares worth over $ 334 million (260 million euros).

This is evidenced in filings with the U.S. Securities and Exchange Commission (SEC), Romney's tax returns, confidential Bain documents revealed on the the U.S. tech blog
Gawker, and data from the Dutch Chamber of Commerce — uncovered by Volkskrant "Follow the Money."

8 million
According to tax Jos Peters, who advises large private equity firms, with the Dutch route Bain managed to dodge about 80 million in taxes. "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 still participated as part of his severance scheme. So he invested in 2004 with his wife Ann Romney in the Bain Capital Fund VIII. This Cayman Islands based fund has a significant interest in Warner Chilcott. Of the 37.5 million Warner Chilcott shares that Bain had in its possession in September 2010, there are still 25.7 million in the Bain Capital Fund VIII.

In his public financial disclosures Romney reports that his shares in the Bain Capital Fund VIII are worth 'over a million'. The 2010 and 2011 tax returns of Romney and his wife show that they received more than $2.05 million in dividends 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. In so doing Romney avoided taxation in the United States. Gifts of shares to designated non-profit organizations are excluded from capital gains tax. Moreover, the gift was tax deductible.

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

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

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

Netherlands was not yet on that list. Wrongly, it turns out. Netherlands was in the news recently as rather as attractive tax junction in connection with a tax shortcut tax for the U.S. coffee chain Starbucks, which caused great consternation in England.

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