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Written by:
Bas Hollenberg


Outlines of tax regime overhaul

The State Secretary for Finance in parallel to the Tax Plan for 2015 has written to the Lower House of the Dutch Parliament concerning potential choices to be made as part of a tax regime overhaul. 

The Dutch cabinet intends to implement a system overhaul with the aim of boosting employment, and in order to gain as much backing as possible is currently looking for support both politically and at grassroots level. Certain preconditions apply, in that economic growth should not be allowed to prompt a balanced income distribution being sacrificed while the funding of economic growth may not be anchored in rising government deficits. It is conceivable that measures affecting allowances or benefit levels may have to be taken in order to avoid a gratuitous money circulation scenario coming about. 

The State Secretary in his letter perhaps surprisingly has refrained from including a detailed proposal for a tax regime overhaul, and has instead listed a series of options with the aim of getting the discussion going. The tax regime overhaul should result in the streamlining of the system in conjunction with enhanced employment and economic growth. The cabinet is convinced that employment-related and entrepreneurial charges should be controlled. This could be offset by increasing consumption-related taxes, for example by curbing the use of the reduced value-added tax rate or increasing said lower rate. The cabinet has indicated that an increase in the tax on imputed return on investment would be an unlikely move. 

The State Secretary’s letter lists the following potential scenarios:
Scenario 1 – Simplification in terms of tax allowances and motor vehicle taxes in particular.
Scenario 2 – Safeguarding future implementation.
Scenario 3 – Gearing of the fiscal incentivisation of entrepreneurs to innovation and sustained growth.
Scenario 4 – Seeing to a better tax burden distribution for private individuals over the course of life.
Scenario 5 – Reduction of tax rates by cutting back on tax credits.
Scenario 6 – Causing the tax burden to shift from the employment and entrepreneurial spheres to the consumer sphere.
Scenario 7 – Helping the tax burden shift from the employment and entrepreneurial spheres towards sustainability.
Scenario 8 – Opening out of the municipal tax sphere. 

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