Unilever's withdrawal to move its headquarters to trigger political fallout for Dutch PM

Unilever's withdrawal of plans to move its headquarters to Rotterdam looked likely on Friday to trigger political fallout for Dutch Prime Minister Mark Rutte over his unpopular proposal to scrap a withholding tax on dividends.

Unilever said it had given up on moving to Rotterdam for now under pressure from shareholders at its British arm, who worried about the future tax treatment of Dutch dividends.

Rutte, who worked for Unilever from 1992-2002 before entering politics, had yet to respond to the news early on Friday.

But he will be bracing for a barrage of questions at his weekly press conference later in the day over whether the 15 per cent dividend tax - earmarked for removal in theory to attract foreign investment - will now be retained after all.

While doubts have grown in recent weeks among dual-listed Unilever investors over the wisdom of the move to a sole HQ in the Netherlands, Rutte has been fighting an increasingly lonely battle in favour of scrapping the tax.

Opponents branded it a costly tax break for foreigners, a gift for foreign governments, and a boon for multinationals.

Unilever and a second Anglo-Dutch firm, Shell, had in particular lobbied for the tax cut. In a poll published early last month, just 11 per cent of Dutch voters said they still supported the idea, most from Rutte's VVD Party.

Rutte's coalition partners have signalled they are only still backing the plan because they had agreed to it in their governing pact.

The coalition holds a single-vote majority in both parliament and the Senate.

Last month, Rutte, himself once a Unilever employee, defended the plan for the fourth time in parliament, saying failure to approve it risked seeing Shell and Unilever abandon their Dutch headquarters.

"You could still opt to hold on to the tax, but there’s a large risk that these companies would then decide to leave," he said.

Unilever's UK shares were down around 1 per cent in early morning trade, while its Dutch shares were flat. 

(With inputs from agencies.)