The Dutch cabinet is planning to introduce an additional bracket in income tax. Minister of Finance Eelco Heinen is considering the decision before Budget Day next Tuesday.
The coalition agreement had already suggested the idea as part of a goal to distribute billions for tax relief. Sounds good, right?
Well, not everyone is convinced the measure will benefit the right groups, de Telegraaf reports.
What’s the plan?
While the coalition wants to focus on lower-income and middle-class workers, this new bracket would also benefit high-earners. That’s because everyone would pay less tax on the first part of their income.
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Currently, there are two income tax brackets in the Netherlands.
In the first bracket, people pay just under 37% of tax on their income of up to approximately €75,000. Earnings above that amount are taxed at 49.5%.
The cabinet’s new tax rate for the initial income is still being discussed, and the specific rate and income threshold for this bracket are not clear yet.
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Alternative, targeted options that could increase the purchasing power are also still being considered in the budget talks. However, these kinds of measures are often trickier and, well, messier to implement.
A simpler system could be complicated again
The number of tax brackets was reduced to two just four years ago by the Rutte III Cabinet to make the system easier to understand.
Adding another tax bracket back in again would be a complex decision.
The cabinet should conclude its budget talks this week as the national budget for 2025 will be approved. This is presented on Budget Day next Tuesday.
What do you think of having an additional income tax bracket? Let us know in the comments.