Prinsjesdag, (literally princes day) is a strange Dutch affair. Most would think that it would be much like Koningsdag; a day of celebration, merriment, and lots of booze. However, this is a much drier event. I’ll warn you, it contains traces of taxes.
Now, I know that tax, budgets and public spending isn’t the most interesting topic, or the most invigorating. But I see it in another way. This budget report highlights what the government thinks needs the most attention in the financial state of the country. This is where the government can make or break itself, with the lives of everyone within it on the line. It’s pretty exciting, when it’s put like that. It’s like Die Hard, only with more paperwork.
So, it’s that time of the year again, where the budget is decided. Much like other monarchies, this is set through a speech by the ruling monarch. Although, it’s mostly a ceremonial affair; the ministry of finance is the department that actually decides the budget, hands it over to the king with a note attached politely reminding him of the constitution, not that Dutch royalty are overly eager for power. In case you were interested, the arrival looks a little something like this:
After the Kings grandiose speech, comes the real meat and potatoes of the day, the Budget Memorandum, which was proposed to the Second Chamber by Financial Minister Jeroen Dijsselbloem on Tuesday 15th September. In his statement on the budget, he said that while the economic growth of The Netherlands was better than expected, the 2% and predicted 2.4% increase over this and next year was not good enough. As such, this particularly memorandum is targeted at addressing these issues, with the goal of lowering the deficit.
Without further delay, here are some of what I feel are the most important points to take from this memorandum.
Charges on Labour
Let’s get the dry stuff out of the way. Taxation on Labour will see a cut of €5 billion. By doing this the ‘wedge’ average will fall by almost 2 percentage points. The ‘wedge’ is best explained as the difference between labour costs on employers and the net pay to employees. Ultimately, this will shift the tax burden towards low to middle income earners. They hope that, this will act as motivation for people on benefits to return to work. The incentive, therefore, to work (more) is increased particularly for those with the lowest incomes. For every extra euro they earn, they will pay less in tax and premiums. This year it is around 28 percent, and next year it is expected to fall to 23 percent.
However, in order to offset this they will also be implementing incentives for employers to give work to those within the lower end of the labour market. In addition to this, they’ll also be adjusting taxation. The general tax credit will be phased out, and the tax rate will be reduced in the second and third tax bands by approximately 2 percentage points. The third band, however, will be extended so that the top tariff (52 percent) comes from a higher salary; the tax band border will move up by nearly € 9,000 to € 66,422. Overall, this means that income earners will be keeping more of their gross salary.
Think about the children!
There have also been several changes for how employees with children will be taxed and discounted. For example, there is the combination discount, where married couples with children will gain an increased tax credit. As well as this, there is the increased childcare allowance, where from the second kid onwards, you’ll be getting a higher allowance. All in all, these two benefit schemes will be combined into one.
But there’s more! While there have been no changes to the current laws of maternity leave, they have made a proposed change to paternal laws, where paternity leave will be increased from two days to five as of 2017. Though this is great news for aspiring fathers out there, this proposal will cost the Dutch treasury around €60 million. Though, admittedly, this cost does not come from compensation to companies hiring prospective fathers. Rather, it goes towards investment in pre-school childcare, as all toddlers will be allowed two day sessions at a pre-school, making it a tidy €75 million total cost to the government.
We can’t say no to them; here at the DutchReview, it could be said we have a slight… bias towards foreigners. Maybe that’s just me. Though the Netherlands has not had the best ethic towards the refugee crisis, they’ll be setting aside an extra €539 million will be made available for their reception in the Netherlands in 2015. In addition to this, the government has set aside €110 million for reception of asylum seekers coming to the region.
And so concludes the points I think are most interesting in the budget memorandum. Though, this is not nearly close to the full list, which contains a large number of adjustments to taxation, benefits, and changes to the public spending. I’m sure you’ll find it just as interesting as I do. If you’re looking for more information, checking out this link.
Short description: This comes is the Budget Memorandum proposed to the Second Chamber by Financial Minister Jeroen Dijsselbloem on Tuesday 15th September. In his statement on the budget, he said that while the economic growth of The Netherlands was better than expected, the 2% and predicted 2.4% increase over this and next year was not good enough. As such, this particularly memorandum is targeted at addressing these issues, with the goal of lowering the deficit.