Can someone explain how a small country like the Netherlands has a stock of Foreign Direct Investment abroad that is 5,809,000,000,000, and ranked second in the world after the European Union? And what does this mean, is this the total value of assets by Dutch companies abroad? I’m fascinated!
In: Economics
It’s because of multinationals playing tax games, apparently.
[https://www.taxjustice.net/2014/11/10/netherlands-worlds-largest-source-fdi/](https://www.taxjustice.net/2014/11/10/netherlands-worlds-largest-source-fdi/)
> Not surprisingly, the huge FDI from the Netherlands also has a lot to do with tax planning. Most of it consists of investments abroad that foreign multinationals own via Dutch holdings. Only a fifth consists of real Dutch investments.
So we first have to understand what Foreign Direct Investment (FDI) is. This is the dollar amount of foreign companies/people directly investing in companies in the Netherlands.
There are two reasons that the Netherlands ranks so high. First is that many of the bigger companies in the Netherlands are actually traded on stock exchanges in the EU. This artificially raises their FDI.
The other aspect is that the Netherlands has made it very attractive for people in other countries to invest. They have almost no financial regulations that would restrict it, and great tax rates to encourage it.
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