Tax Policies from Dutch Coalition Deal Leak

The four parties due to form a government in the Netherlands are planning various tax reforms.

Christian and liberal parties are expected to form a coalition government in the Netherlands next week.

The public broadcaster NOS has learned they are planning various tax reforms:

  • Tax reform: Income tax brackets will be reduced from four to two.
  • Tax relief: For the elderly and middle incomes.
  • Profit tax: Will be reduced from 20 to 16 percent for small companies and from 25 to 21 percent for larger companies.
  • Sales tax: The low, 6-percent value-added tax rate on basic goods will be raised to 9 percent. Standard VAT rate will remain 21 percent.
  • Home mortgage interest deduction: Will be reduced to 37 percent, effectively raising taxes on especially wealthy homeowners.

Non-tax policies have leaked as well:

  • Long-term sick leave: Small companies will only have to pay workers one instead of two years’ salary during a long-term illness. The second year will be paid from a new employers insurance plan.
  • Child subsidies: Will be raised €1 billion.
  • Euthanasia laws: Will not be relaxed. The liberal Democrats had campaigned on expanding access to assisted suicide, but the evangelical Christian Union is adamantly opposed.

Other questions have yet to answered:

  • Labor market: Many parties feel liberalization has gone too far.
  • Self-employed: There are proposals to force them into an unemployment insurance scheme.
  • Defense spending: The parties agree it needs to be raised, but by how much?
  • Natural gas: Most parties agree drilling for natural gas in the northeastern province of Groningen needs to be brought down, but again the question is by how much?

What’s next?

Party leaders are due to share the agreements they have made with lawmakers on Monday, who need to approve the draft text.

Parliament will then presumably appoint Mark Rutte, the caretaker prime minister, as formateur, which would give them the right to install a new cabinet.