* Review to be completed by end of year - minister
* P&G denies any involvement in tax avoidance
* News comes as Netherlands tries to improve image
* Dutch still hope to attract companies moving after Brexit (Updates with details, background, quotes)
By Toby Sterling
AMSTERDAM, Nov 8 (Reuters) - The Dutch government agreed on Wednesday to review 4,000 tax deals offered to international companies from 2012-2016 after being stung by leaks that show it failed to follow its own vetting procedures in a 2008 case involving Procter & Gamble.
Documents leaked in the so-called “Paradise Papers” trove of offshore records shed light on a previously undisclosed deal with the Dutch government that gave P&G an estimated tax break of $169 million.
P&G, the maker of Pampers diapers, Gillette razors and Tide laundry detergent, issued a statement on Tuesday denying involvement in any form of tax avoidance.
And while there are no allegations the arrangement was in any way improper, the Dutch deputy minister for finance acknowledged in a letter to parliament on Tuesday that the deal, which was signed off on by a single inspector, should have been vetted by an entire team.
“Not following prescribed procedures is unacceptable,” said Menno Snel in the letter. “Therefore I have given the order to investigate whether ... more than 4,000 international rulings were issued in conformity with the guidelines.”
He said the investigation would be complete by year end.
The new Dutch government must walk a delicate line as it attempts to satisfy allies and critics it is taking steps to reform abusive tax practices - while at the same time defending its attractiveness as a place for multinationals to do business.
Expertise on tax advice, consulting on legal structures, accountancy and legal counseling are all seen as key competencies for the Netherlands.
But its reputation has been hurt by a wave of protectionist sentiment that had a hand in derailing a bid by U.S. paint maker PPG Industries for Dutch coatings and chemicals firm Akzo Nobel.
The P&G deal was an “Advance Price Agreement”, a deal wherein a tax authority approves in advance prices one branch of a company charges another when they do business. Multinationals value the certainty APAs and other advance tax rulings bring, while critics say they are often used to shift profits into zero tax jurisdictions.
Tax campaigners say that the Netherlands and Luxembourg specifically rubber-stamp such deals in order to attract investment and jobs. In addition, such deals are also often not available to smaller or less sophisticated firms.
In 2015, the European Commission said the Netherlands had given Starbucks an unreasonably generous APA tax ruling, which helped encourage the company establish its European headquarters in the country. It ordered The Hague to recoup 30 million euros ($35 million) from the company, a decision the government is contesting.
According to data published by the European Commission, EU members granted 978 APAs to EU companies in 2015. The Netherlands granted 236 of these. Belgium gave 474 and Luxembourg granted 145.
The Paradise Paper revelations come at an awkward time for the Dutch government, which said at its installation just last month it would take new measures to crack down on mailbox companies and combat use of the Netherlands as a conduit to tax havens.
Among other measures, the country introduced a tax on royalties when payments are sent to low-tax jurisdictions.
However, in an bid to win over companies seeking new EU bases once Britain leaves the bloc — which have so far mostly chosen bases elsewhere in Europe — Prime Minister Mark Rutte has announced a plan to scrap any withholding tax on dividends.
The government has also promised to lower its tax rate to 21 percent from 25 percent to further woo foreign firms.
“The cabinet is working to create an attractive environment that benefits companies with actual activities in the Netherlands, and is also tackling tax avoidance,” Snel said.
The opposition Green Left party said the measures being adopted did not go far enough.
“The Paradise Papers show that the Netherlands still plays a major role in global tax evasion,” Green Left lawmaker Tom van der Lee.
The Paradise Papers are leaked documents from prominent offshore law firm Appleby that relate to the investments of wealthy individuals and institutions ranging from U.S. Commerce Secretary Wilbur Ross to Britain’s Queen Elizabeth. ($1 = 0.8621 euros) (Reporting by Bart Meijer, Anthony Deutsch, Toby Sterling and Tom Bergin; Editing by Alison Williams)