Dutch tax recommendations in the report: “The road to future prosperity”
Dutch tax recommendations in the report: “The road to future prosperity”
At the request of the outgoing Dutch Schoof cabinet, Peter Wennink issued an advisory report. It focuses on four domains in which the Netherlands can build and maintain a strategic position:
Private investment is needed in these domains. To achieve this, the following four preconditions must be in place:
“Due to an accumulation of measures, such as restrictions on interest deductions, depreciation and loss relief, tax is increasingly being levied at times when investments have not yet yielded a return in business terms. As a result, it takes longer for new projects to become profitable, long-term investments become less attractive and companies move to countries where investments can be recouped sooner and more predictably."
- Digitalization & AI;
- Security & Resilience;
- Energy & Climate Technology;
- Life Sciences & Biotechnology.
Private investment is needed in these domains. To achieve this, the following four preconditions must be in place:
- Accelerate the granting of permits and simplify rules;
- Choose the talent needed for the future;
- Ensure affordable and reliable energy;
- Strengthen the economic infrastructure.
Fiscal Alarm
The report also addresses taxation, starting with an alarming observation (BDO’s translation):“Due to an accumulation of measures, such as restrictions on interest deductions, depreciation and loss relief, tax is increasingly being levied at times when investments have not yet yielded a return in business terms. As a result, it takes longer for new projects to become profitable, long-term investments become less attractive and companies move to countries where investments can be recouped sooner and more predictably."
What Is Needed on the Fiscal Front?
According to the advisory report, a tax system that facilitates rather than discourages investment is a prerequisite for mobilizing private funds on a large scale. What is needed to achieve this? Better alignment of the Dutch tax system with those of competing EU Member States. The phasing out of tax schemes that do not achieve their objective and also complicate the tax system. The proceeds from this (tens of billions) can be used to reduce taxes on labor and profits and to invest. Stability and simplification are objectives of a reform of the tax system. It is important to focus tax incentives on the most innovative activities. The advisory report also advocates broadening the investment deduction scheme and retaining tax schemes that promote innovation, such as the Research and Development Promotion Act (WBSO) and the innovation box regime in the Dutch corporate income tax.Concrete Fiscal Recommendations
The report includes the following specific recommendations that are tax related:- Reduce energy tax on electricity for industrial large-scale consumers to the European minimum rate;
- Do not tax Dutch companies more heavily than competitors in neighboring countries, for example through a national CO₂ tax;
- Reduce the effective marginal tax burden on labor and profits by abolishing inefficient tax schemes;
- Link aviation tax to funds for sustainability and modernization;
- Harmonize the Dutch tax system with that of competing EU member states;
- Maintain and expand tax benefits for knowledge workers, such as the 30%-ruling;
- Make retraining and further training fiscally attractive for employers and employees, in the same way as is currently done for Research & Development (R&D);
- Reform the transition allowance received upon dismissal. Link this to the development of a fiscally attractive personal development budget, enabling people to work or learn.
