Netherlands Chooses Military Over Aid: How Tax Havens Undermine Democracy
Photo © Ahmed Akacha

Netherlands: Military Over Aid — The Same Country, Both Ends of the Money

The Netherlands cuts aid, raises defense spending to 5% of GDP, and hosts arms makers’ tax shelters.

Military Over Aid, in Four Numbers

5%

share of GDP NATO members, including the Netherlands, have committed to spend on defence and security annually by 2035

~20%

real-terms increase in European and Canadian defence spending in 2025 alone, the figure NATO’s Secretary General presented to Trump in Washington this week

7 of 10

of the world’s biggest arms companies hold tax constructions in the Netherlands, according to Dutch Chamber of Commerce research by Stop Wapenhandel

€600 million

what remains of the Dutch civil society development budget for 2026–2030, down from €1.4 billion, a cut the new government has pledged to partly reverse, but has not yet undone
NL

Military Over Aid — One Country, Both Ends of the Money

Some countries cut foreign aid and leave it there. The Netherlands cuts foreign aid, raises its own military spending to one of the most ambitious targets in NATO history, and, almost unnoticed, hosts the tax shelters of a majority of the world’s largest arms manufacturers. These are not three separate Dutch stories. They are one story about where a wealthy country decides its money belongs, told from three different angles.

RYB’s Dutch Finance page covers the aid cuts and the country’s tax haven status in detail; this page exists for the angle that connects directly to peace and conflict: a NATO member ramping up defense spending to historic levels while sheltering, on paper, some of the arms industry’s largest tax bills.

A NATO Commitment Without Precedent

In June 2025, NATO allies meeting in The Hague agreed to something with no real precedent in the alliance’s history: 5% of GDP spent on defence and security every year by 2035, more than double the 2% threshold that had governed NATO spending since 2014. Of that, 3.5% must go to core defence, the other 1.5% to broader resilience and security infrastructure. NATO’s Secretary General called it a “transformational leap”; the agreement itself names Russia as the alliance’s most direct and significant threat.

The Netherlands is not lagging on this commitment, it is ahead of it. Dutch defence spending reached 2.59% of GDP in 2025, comfortably past the old 2% minimum, having crossed that older threshold for the first time since the early 1990s only the year before. Total Dutch defence spending was €19.9 billion in 2024; the Dutch central bank now projects an additional €19 billion a year by 2035 to meet the new 5% target, a sum the bank itself says will mostly flow toward imports in the short term, since the Netherlands has limited capacity to manufacture tanks, artillery, or ammunition domestically. Where Dutch industry can compete, the central bank notes, is in dual-use technology: semiconductors, chips, and the precision optics the country already leads the world in producing.

The scale of the wider shift became hard to miss this week. Meeting President Trump in Washington on 25 June 2026 ahead of NATO’s Ankara summit, Secretary General Mark Rutte stood up in the Oval Office with a chart labelled “the Trump Trillion,” showing more than one trillion US dollars in cumulative additional core defence expenditure by European allies and Canada since 2016. Rutte told reporters that Europeans and Canadians spent almost 20% more on defence in 2025 than the year before, and that the alliance is now “on a trajectory to equalise their spending with the United States.” The chart was as much theatre as data, presented to flatter a famously praise-sensitive president, but the underlying number is real: European NATO spending is rising faster, in percentage terms, than at any point since the Cold War, and the Netherlands’ own trajectory is part of what that chart is measuring.

Where the Money Used to Go

That military build-up is happening at the same time the country’s development budget has been cut more sharply than almost any other DAC donor’s, though the story here is genuinely mid-sentence rather than settled. The cut itself is real: Dutch civil society development funding fell from €1.4 billion to roughly €600 million for the 2026-2030 period, a reduction announced under the previous Schoof cabinet in November 2024. The Netherlands now has a different government. The Jetten coalition, sworn in February 2026, has pledged in its own coalition agreement to reinvest specifically in the areas cut hardest, humanitarian aid, climate, education, women’s rights, and civil society, though as RYB’s Dutch Finance page details, the new government is a minority coalition that needs opposition votes for nearly everything, and its own April 2026 attempt to restore a single cut to UNRWA funding triggered immediate political backlash. The civil society cut stands as announced for now; whether reinvestment actually arrives is the open question, not a settled fact in either direction.

RYB’s ODA page covers the global version of this same story, including the largest single-year aid contraction on record across the whole OECD in 2025. The Dutch pattern is not an outlier. It is one country’s version of a trade-off playing out across nearly every wealthy NATO member at once: aid budgets cut hard under one government, defence budgets rising fast under nearly every government, and genuine uncertainty about whether any of the aid side gets rebuilt before the defence side reaches its 2035 target.

A Tax Haven for the Arms Industry Itself

Here is the part of the story almost no one connects to the other two. The Netherlands is not simply a country that manufactures weapons or buys them. It is, on paper, a country where a remarkable share of the world’s arms industry already keeps its money.

The clearest evidence comes from Stop Wapenhandel and the Transnational Institute, who searched the Dutch Chamber of Commerce register against the world’s largest arms producers. Their research, first published in 2015 and updated in 2018, found that seven of the world’s ten biggest arms companies hold tax constructions in the Netherlands, and that more than half of the top 100 maintain a holding or establishment there. By their estimate, roughly one in every two dollars earned worldwide from weapons production runs through a financial structure registered on Dutch soil. Most of these companies have, by the researchers’ own description, “zero or minimal personnel presence” in the country: empty offices, sometimes no more than a mailbox. It is worth being transparent about the evidence here: this is the most rigorous public research available on the question, built from primary company-registry data, but it has not been comprehensively re-run since 2018. The underlying tax incentives that made the Netherlands attractive to this industry, the treaty network, the participation exemption, and the advance-ruling system, remain in place largely unchanged, which is why researchers and journalists continue to cite the finding as current.

The examples are concrete rather than abstract. Airbus’s predecessor, EADS, registered its headquarters on the 11th floor of an ING Trust office in the Netherlands, with no desks, no telephone, and barely any staff, purely to take advantage of Dutch tax treatment. BAE Systems, maker of the Eurofighter Typhoon and a wide range of armoured vehicles, operates through at least two Dutch holding entities. General Dynamics, manufacturer of the Trident nuclear submarine and the M-1 tank, holds its European structure through a Dutch entity as well. None of this is illegal. It works for exactly the same three reasons the rest of RYB’s Dutch Finance reporting describes: the country’s vast tax treaty network, its participation exemption on dividends and capital gains from foreign subsidiaries, and an advance tax-ruling system that rewards large multinationals with certainty in exchange for locating a holding company on Dutch soil.

The global market these structures shelter is not shrinking. SIPRI’s authoritative Top 100 ranking, the most recent full-year data available, recorded global arms revenues reaching $679 billion in 2024, up 5.9% on the year before and 26% over the preceding decade, driven by the wars in Ukraine and Gaza and rising military budgets worldwide. Every signal since suggests 2025 went further still: NATO’s own Secretary General was in Washington this week presenting figures on just how much further European and Canadian defence spending climbed last year alone. The Dutch parliament had a direct chance to claim a share of that growth for the public purse: in 2024, the cabinet considered, and explicitly declined, a proposed windfall tax on arms manufacturers’ excess wartime profits, citing legal, implementation, and economic objections. The country that shelters a meaningful share of this industry’s holding structures also chose not to tax its wartime profits when given the opportunity.

The Connection Worth Naming Plainly

Put the three pieces next to each other and the pattern is hard to miss. A government cuts the aid budget that funds clinics, schools, and shelters abroad. The same government commits, under NATO pressure, to one of the most ambitious military spending increases any alliance member has ever signed. And the same country’s tax architecture already shelters a meaningful share of the profits earned by the global industry that builds the weapons that spending will buy. Each decision was made separately, by different ministries, under different political pressures, and each is individually legal and defensible on its own terms. Together, they describe a state whose financial architecture quietly subsidises the war economy on one side of the ledger while its aid budget shrinks on the other.

RYB’s Place in This Picture

RYB does not have a position on how large any country’s defence budget should be; that is a legitimate democratic question with real security stakes, and reasonable people disagree about NATO’s new target. What RYB can do, consistent with every other page in this Finance section, is make the connections visible: between a development cut and a defence increase happening in the same government term, and between a defence increase and a tax system that, by independent researchers’ own account, already shelters a majority of the industry profiting from it. A Culture of Peace argument is not an argument against security. It is an argument that security built partly on hollowed-out aid budgets and partly on hosting the arms industry’s own tax shelters is a strange, quietly contradictory kind of security to call peaceful.

Looking Forward

Defence budgets across Europe are set to keep climbing for the next decade under NATO’s new target, and aid budgets, on current trajectories, are not set to recover on the same timeline. Whether the Netherlands’ specific role as a holding ground for arms-industry tax structures changes under the new government’s broader tax and development commitments is something RYB will keep tracking on this page, the same way the Dutch Finance page tracks the aid side of this same ledger. The two pages describe one decision, made in two ministries, and a country’s choice about which kind of strength it would rather fund.

Sources

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