PwC Among Putin's Enablers In Amsterdam, Watchdog Says

Russian state-owned energy company Gazprom has at least 16 subsidiaries in Amsterdam, the Center for Research on Multinational Corporations said Thursday in a report calling firms, including PwC, enablers of President Vladimir Putin for having the companies as clients. 

Putin is receiving an important source of income to fund the war in Ukraine from so-called special purposes entities, or letterbox companies, in Amsterdam tied to the world's largest natural gas company, owned by the Russian government, the research center said. Letterbox companies are those with mailing addresses set up in particular countries to take advantage of the Netherlands' extensive treaty network and avoid tax. The Netherlands' Ministry of Finance and the Dutch central bank have shown they favor the increase of these companies, the center said, labeling them, along with the Dutch tax authority, accountants, tax lawyers and trust service providers, as "Putin's enablers." 

"As they crafted policies to maintain a competitive edge as a leading tax haven, these Dutch institutions became complicit in building an offshore infrastructure that allows 'strongmen' and oligarchs to protect and augment their considerable wealth," the research center said in the report.

The Netherlands' policy of attracting capital by offering tax advantages has led to effective tax breaks that are subsidizing the war in Ukraine, given the strategic importance of Gazprom revenues, the organization said.

The center said going after "Gazprom's enablers" is the best course of action to address the issue. In addition to PwC, which provides auditing services for all Gazprom entities in the Netherlands, the watchdog also named Intertrust NV, which provides trust services to Gazprom's Dutch entities, and Houthoff, the legal representative of Gazprom entities in the Netherlands.

A spokesperson for PwC Netherlands did not immediately respond to a request for comment, nor did the press relations team at Intertrust Group. A press manager at Houthoff also did not immediately respond to a request for comment.

The research center said it gave all three firms a chance to respond before publishing its report and included portions of their comments, except in PwC's case, saying the firm provided nothing substantive.

According to the report, Intertrust NV told the center that, in line with the company's purpose, it has decided not to accept any new Russian clients across its 45 locations.

"Furthermore, to demonstrate our commitment to acting responsibly, we have started the process of exiting all current Russian clients," it added.

Houthoff said it "has decided to terminate its relationship with the Russian Federation as well as with associated persons and companies" due to "the acts of war by the Russian Federation in Ukraine. In addition, Houthoff will not accept any new instructions from such parties," the center quoted the firm as saying.

The report said that although the law firm declared a review of its Russian clients after the invasion,​​ Houthoff is the legal representative of Gazprom entities in the Netherlands.

Houthoff's response said Dutch lawyers "are subject to strict professional rules of conduct when dealing with a decision of this nature, also when circumstances are as severe as currently the case in Ukraine." The lawyers will "honor the applicable duty of care in the execution of this decision ... in consultation with the Dean of the Amsterdam Bar."

The center, also known as SOMO, asked all legal and corporate service providers in Amsterdam to drop Gazprom subsidiaries as clients and not to accept new Russian clients.

"The Dutch government can help by immediately and temporarily making any sale of domestically owned assets by a foreign investor illegal for Russian firms,'' Rodrigo Fernandez, a researcher at SOMO, said in a news release. "This would in effect freeze Gazprom's assets in the Netherlands." 

The Dutch system "attracts strongmen, oligarchs and dubious foreign wealth, while robbing many countries of crucial tax revenues," the organization said. The Netherlands is the world's second-largest destination for capital flows from Russia, according to the organization, which labeled Amsterdam as the world's largest tax haven for conduit companies.

Gazprom's 16 Dutch subsidiaries held at least $20.6 billion and transferred over $5.8 billion to the parent company in Russia during 2020, equivalent to 1.9% of the Russian Federation's budget that year. The Russian federal government holds a majority of the company's shares.

"There is a need for a strategic reorientation away from promoting the vast capital flows associated with tax avoidance towards meaningfully addressing the growing global inequalities of power and wealth which are at the root of so many social and environmental ills," the report said.

Spokespeople for Gazprom, the Dutch Ministry of Finance and the Dutch central bank did not immediately respond to requests for comment.

The Netherlands' tax authority, Belastingdienst, could not immediately be reached for comment.

--Editing by Roy LeBlanc.

Correction: A previous version of this article misstated Gazprom's assets in the Netherlands. The error has been corrected. 

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