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Written by:
Bas Hollenberg


Report on sole traders

The report on the interdepartmental policy survey into sole traders which the Dutch cabinet has had carried out accompanied by the cabinet’s response has been submitted for the scrutiny of the Lower House of the Dutch Parliament. The survey has borne out that the phrase “sole trader” is subject to generous interpretation and that the category of sole traders combines all sorts of (small-scale) entrepreneurs. The number of sole traders in the Netherlands has doubled over the past 15 years, in sharp contrast to trends in neighbouring countries. The survey was aimed at identifying the consequences of the emergence of sole tradership in the areas of employment law, employee insurance and tax matters. 

Professionals who operate on a self-employed basis are responsible for their own retirement and occupational disability arrangements. The degree to which they actually make these provisions depends not only on personal preferences and market facilitation: there are quite a few sole traders who would like nothing better than to take out insurance if only they were financially able to do so. The report has confirmed that although the category of sole traders boasts a relatively large number of low-income earners, their net expendable income still turns out similar to that earned by their “regularly employed” peers owing to their having to pay fewer taxes and social insurance charges while being able to lay claim to a greater degree to tax allowances. Any self-employed professional who for income tax purposes boasts entrepreneurial status and works an adequate number of hours has entitlement to tax facilities such as tax relief for the self-employed. 

The use of facilities such as the one referred to above has a disruptive impact on the labour market. According to the working party by which the report was compiled, it would be help if the tax regime governing entrepreneurs and that governing “regular” employees were evened out. Those who for income tax purposes qualify as entrepreneurs and those having director-cum-controlling shareholder status both count as “entrepreneurs” in this context. It has been established that the discrepancies between the two regimes tend to make it as lucrative for workers to switch to operating on a self-employed basis as it does for employers or principals to engage self-employed workers when there is work to be performed. The Dutch cabinet is keen to stop the choice between the two being made on the basis of prevailing rules and regulations rather than on that of the combined requirements and preferences of those who carry out the work and those who hand it out. Several paths have been charted for overcoming the differences in (fiscal) treatment. According to the cabinet, a broadly based social and political debate is what is called for, and rather than making choices at this early juncture has for now decided to focus on tackling “phantom sole tradership”, adding to the attraction of operating as an employer and ensuring that it should become easier for the self-employed to protect themselves professionally.

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