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Impact Investing

IPE special report May 2018

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Netherlands: Staatsen proposals under scrutiny

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NETHERLANDS – The Staatsen proposals, which could curb Dutch pension funds’ ‘non-core’ activities, have been examined by a Dutch parliamentary committee.

The committee met yesterday to discuss the Staatsen Commission’s recommendations. Social affairs minister Mark Rutte made it clear that he funds to stick to their core business activities.

Investment activities such as mortgages, loans and insurance are to be considered non-core business – which could mean that corporate taxes being levied on the additional activities.

MPs on the social affairs committee said this could result in increased taxes paid by Dutch funds - not only in the Netherlands but in the US as well. Rutte’s target of 100 million euros in taxes on non-core activities could mean an extra 200 million euros in taxes in the US.

According to a recent study by the largest Dutch pension fund ABP, the total costs of a dividend tax will be around 200 million euros.

Currently, Dutch pension funds are not taxed. A US-Dutch tax treaty states that companies or funds which have investments in the US are exempt taxed if they are not taxed in the Netherlands.

According to ABP, if Rutte’s recommendations that pension funds should not have investment portfolios of more than 20% in a company, this also will lead to “immense repercussions”.

In the case of ABP, more than six billion euros is currently invested in this type of portfolio. If curbed, so-called impairment costs would be around five percent, or 300 million euros. Reinvestment costs were put at a further 300 million euros.

And the reallocation of investment to other types of real estate also would incur extra costs, the fund says. ABP sees a negative yield of around 0.8% - or 800 million euros. This would have to be covered by increased premiums.

Christian Democrat MP Peter Omtzigt told IPE that this will be a non-issue and that CDA MPs would not allow it to happen. He said it was against the new European pension directive – which states that pension funds should be able to have additional investment activities, such as in real estate.

Omtzigt said pension funds should be able to have a very active and effective investment portfolio strategy. One of the core goals of pension funds is to reap the full rewards of their investments to increase yields and overall pension security. Pension funds should be able to reach the optimal performance available.

He said that Rutte’s tax scheme is largely based on a perceived idea that insurance and mortgage activities should be taxed. Omtzigt added that this would not only be very negative for pension funds, but will also result in a breakdown of the real estate market in the Netherlands.

If pension funds will retract from real estate investments, house and office prices will collapse.

This idea was backed by Roderick Munsters, investment chief at PGGM. He said yields would dwindle if the plan goes ahead – and that premiums would need to rise by more than two billion euros a year.

Labour party MP Staff Depla told IPE that he agrees. His view is that there is nothing positive or feasible in the Staatsen recommendations.

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