30% limit to be capped, increase in corporation tax and assets

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Finance Minister Sigrid Kaag talks to reporters ahead of the cabinet meeting. Photo: Sem van der Wal ANP

The government has decided to cap rather than scrap the 30% rule that some people who travel to the Netherlands for work can benefit from.

The cut is part of a package the government introduced in Friday’s spring statement and will help pay for higher spending on defence, state pensions and savers’ compensation.

The 30 per cent order, which entitles claimants to 30 per cent of their wages tax-free, will now only apply to a maximum of €216,000 of gross earnings, so those earning more will pay the full rate of 49.5% on the excess. .

The €216,000 figure is the so-called Balkende standard, named after former prime minister Jan Peter Balkenende, which set a maximum cap for public sector pay in line with the prime minister’s pay.

Nothing will change for international workers who earn less and the salary cap will be staggered over three years.

Defense

As previously disclosed, the government has also agreed to increase defense spending to 2% of GDP, which will cost €2.2 billion per year.

The minimum wage will increase by another 2.5% in 2023, rather than 2024, as will the state pension. The increase in pensions will be partly financed by the reduction of additional tax relief for better-off pensioners with company pensions.

“The stronger shoulders will have to carry more,” Finance Minister Sigrid Kaag said.

An additional 3.6 billion euros will be used to compensate savers who have paid too much tax on their savings, following a long legal procedure.

Society taxes

Businesses and wealthy individuals will pay the bulk of the additional expenses. Companies will have to pay the higher corporation tax rate of 25.8% on profits above €200,000, instead of €400,000 as expected, bringing in €1.3 billion.

Individuals will pay more tax on their assets and the increase in the deduction for non-taxable assets (currently €50,650) will not take place. People with income in “box 2” will also pay more tax: 26% on income up to €67,000 and 29.5% on the rest.

The transfer tax payable on property purchased as an investment will increase to 10.1%.

Investments in new public funds, designed to boost innovation, tackle climate change and nitrogen-based pollution, will also be cut by €2.2 billion. The government will work “smarter and more efficiently”, said Christianne van der Wal, minister responsible for pollution control.

Opposition

The cabinet needs opposition support to push through more controversial measures through the Senate, where it controls just 32 seats, six short of a majority.

So far, the reaction from opposition parties has been mixed. GroenLinks chief Jesse Klaver said the spring statement lacked a sense of urgency. The PvdA said that despite raising the minimum wage and pensions, efforts to help low-income households cope with soaring inflation are not enough.

JA21 criticized the tax increases, saying the coalition had “veered left”. The three parties could help the government secure a majority in the upper house of parliament.

Employers are also upset that they have to foot the bulk of the bill in the form of higher taxes, Financieele Dagblad reported.

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