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Source: Government of the Netherlands

News item | 18-05-2022 | 15:39

European fiscal framework

In October 2021, the European Commission launched a consultation on the future of the economic governance framework. Finance ministers have actively engaged through the Eurogroup and Ecofin to coordinate economic and fiscal policies across the euro area.

The Dutch government recently informed parliament about how the SGP can be reformed in the Netherlands’ view. ‘The Netherlands will take a constructive approach regarding how the SGP can be improved. We are ambitious and want to work together for the future of Europe’, said Minister Kaag.

Eurogroup President Donohoe welcomed the Netherlands’ commitment to a broad search for a compromise acceptable to all: ‘An effective economic governance framework, based on national ownership, simplification and enforcement, will enhance budgetary coordination in the euro area at a time when it is really needed. I am heartened by Minister Kaag’s commitment to looking for constructive solutions that will strike the right balance between fostering growth-friendly investments and ensuring fiscal sustainability.’

Banking Union

Completing the Banking Union has been a longstanding European objective since this major project was set in motion more than a decade ago in response to the financial crisis. On the basis of a mandate given by EU leaders, the President of the Eurogroup presented in early May a proposal for a work plan on all outstanding elements needed to complete the Banking Union. The President of the Eurogroup said, ‘Agreeing on a Banking Union work plan will bring a positive, forward-looking focus to our banking system. It will ensure our banking system is supported by common safety nets, is agile and competitive on the global stage, protects taxpayers and depositors, and supports European strategic autonomy.’

The Netherlands is positive about the President of the Eurogroup’s efforts to quickly arrive at a new work plan for the completion of the Banking Union. Minister Kaag said, ‘There is still work to be done here and Paschal is working hard on this. A strong Banking Union is crucial for the Netherlands and Europe. It will make banks financially healthier, so that savers and society as a whole run fewer financial risks.’

European Stability Mechanism

Next Monday, finance ministers in the Eurogroup will discuss the process for selecting a new Managing Director of the ESM, to succeed Klaus Regling, who will retire as of October. There are four candidates from Italy, Luxembourg, Portugal and the Netherlands. The Netherlands has put Menno Snel forward. ‘We think he is an extremely good candidate with a firm grasp of policy detail,’ says Kaag. ‘He is an economist who can build bridges and combines expertise and experience.’

Source: Government of the Netherlands

News item | 18-05-2022 | 14:00

These conclusions can be found in the Central Government Annual Financial Report and the Central Government Annual Report, submitted to the House of Representatives on the government’s behalf by Minister of Finance Sigrid Kaag on Accountability Day.

‘We look back on 2021 as a year of strong recovery, with high economic growth and low unemployment,’ the Minister said. ‘Now we’re going to have to call on the flexibility and resilience demonstrated by the Dutch people during the coronavirus pandemic once again as we deal with the terrible war in Ukraine. In addition to causing enormous human suffering, this war also has financial implications. We will have to respond to these extraordinary times together as well, by sticking to our course and making careful choices.’

In order to assist businesses affected by coronavirus and ensure that employees kept their jobs, the government continued to provide support packages in 2021. These support packages and the measures to combat the pandemic, such as vaccinations and test capacity, accounted for expenditure of more than €30 billion.

Public finances and economic developments

Despite the unforeseen extra expenditure related to the coronavirus pandemic, the public finances were in better shape than expected in 2021. This was partly thanks to the rapid economic recovery. Government tax receipts increased and the fact that more people were in work reduced spending on benefits. The total government budget deficit (central government, municipalities and other public authorities) was 2.5% of gross domestic product (GDP). Government debt was 52.1% of GDP.

Strong economic growth of 5.0% was achieved in 2021, as the economy rebounded from the economic blow dealt by the coronavirus pandemic in 2020. There were historic shortages in the labour market, with unemployment remaining low (4.2%). However, the tight labour market did not lead to strong wage growth. Wages rose on average by 2.2%. Inflation averaged 2.7% in 2021, but rose substantially in the final months of the year to more than 5%.

Rapid development of compensation schemes

In the annual reports the government reviews revenue and expenditure in 2021 and sheds light on the various ministries’ spending. In its response to the annual reports, the Court of Audit will today indicate whether the money was spent in a regular manner and what can be improved.

The management of central government finances remained under pressure in 2021, as it had been in 2020. The year was dominated by the coronavirus crisis, compensation schemes for Groningen and childcare benefit rectification measures. Ministries devised a wide range of schemes under a great deal of pressure and in some cases the speed at which this was done had an adverse impact on the regularity of financial transactions.

The government wants to reverse this trend by making extra efforts to ensure that financial processes are managed with due care. This will involve for example reassessing the financial frameworks, such as the Central Government Financial Management Order. The aim is to prevent incidental irregularities from becoming structural. The government also wants to preserve an orderly budget process and concentrate budgetary decision-making at a single point in time. It is crucial that the process is not rushed, in order to ensure that all interests involved can be weighed properly and that all the applicable rules can be followed. This will help improve policy and promote the regularity of the public finances.

Source: Government of the Netherlands

News item | 04-04-2022 | 18:52

With the response to the pandemic and the war in Ukraine clearly in the foreground, this joint document – presented by Spain and The Netherlands, two countries traditionally identified with divergent positions on this matter –  emphasizes the need to find consensus.

A reformed  European Fiscal Rules should deliver on “the core objective of reinforcing fiscal sustainability through country-specific consolidation strategies that are realistic, gradual but ambitious, as well as compatible with economic growth and job creation” Furthermore, the paper mentions the need for economic reforms, high quality public investments and clear safeguards.

Following the meeting between the President of the Spanish Government, Pedro Sánchez, and the Dutch Prime Minister, Mark Rutte, Spain and the Netherlands reinforce their collaboration in key medium-term economic priorities.

In a joint press conference with Minister Kaag in Luxembourg, in the margins of the Eurogroup, Vice President Calviño highlighted the need to “leave behind divisive debates and build on the basis of the strong existing consensus in key areas to strengthen the European economy and face present and future challenges”. Vice President Kaag emphasized that the Netherlands wants to “take a constructive approach in the debate and stressed the need for cooperation.”

Source: Government of the Netherlands

News item | 24-11-2021 | 17:28

During the conference, it was agreed to provide more insight into green export finance and make it more measurable, so that progress can be tracked and compared, including against the Paris climate goals. In addition, the countries have agreed to increase efforts to develop new forms of green export finance and promote cooperation on this theme in international forums like the Organisation for Economic Cooperation and Development (OECD).

All members of the E3F coalition signed the COP26 statement. The statement sets out agreements to accelerate the green energy transition through new export finance policies and end government support for the fossil fuel energy sector.

Cooperation crucial

State Secretary for Finance Hans Vijlbrief chaired the E3F Conference on behalf of the Dutch government: ‘The fact that we are organising this conference so soon after COP26 in Glasgow underlines that we, the Netherlands, want to work globally for greener export finance. That’s crucial. Because we want to both achieve our climate goals, stimulate future economic growth and maintain a level playing field. And the only way to do that is by working together to use export finance for sustainable outcomes. The Netherlands will continue to push for this via the E3F coalition.’

In order to monitor progress, the E3F countries have agreed to report jointly on green transactions. The first such report will be published within the next six months. The coalition will also continue to work to involve as many other countries as possible in this initiative, partly with a view to creating a level playing field. During the conference, Belgium, Finland and Italy became members of the coalition.

National measures

The government has also introduced various national measures to make export finance – specifically export credit insurance – greener. These measures involve tracking ratios of green to fossil fuel investments in portfolios and providing broader coverage options for green transactions.

Export Finance for Future (E3F) was launched in spring this year by Denmark, France, Germany, the Netherlands, Spain, Sweden and the United Kingdom. The E3F Statement of Principles can be found here.

Source: Government of the Netherlands

News item | 22-11-2021 | 16:50

The Committee is calling on the government to ensure greater transparency about conduit companies, subject them to greater supervision and oblige them to report on their activities more. These measures would make the Netherlands less attractive to shell companies and, from being an outlier, could bring the Netherlands into the mainstream as regards its position on conduit companies.

The sector can be made more transparent by making changes to the register of ultimate beneficial owners (UBO register), which identifies the person or organisation behind these companies. Currently, conduit companies need only draw up a limited annual report. If statutory reporting requirements were brought into line with those applicable to companies that do have active business operations, it would be less attractive to set up a shell company.

On the international stage, the Committee would like to see countries agreeing to end tax advantages like the participation exemption for empty entities and actively sharing information about conduit companies. To this end, the Committee is proposing the establishment of an international UBO register.

In 2019 there were some 12,400 conduit companies in the Netherlands holding total assets of around 4,500 billion euros, which is five and a half times the size of the Dutch economy. Tax is not levied on total assets, of course; only on incoming and outgoing payments. An average of 170 billion euros flowed through conduit companies annually between 2015 and 2019. The direct employment these companies generate is limited; estimated at three to four thousand jobs. The treasury received an estimated 650 million euros from conduit companies in 2019, which amounts to 0.2% of total tax revenues. 

The Committee believes that the term ‘conduit company’ as defined in existing legislation results in too narrow a conception of conduit arrangements that is at odds with the expectations of the House of Representatives, the government and the public at large. The relevant factors are whether a company has international structures, conducts transactions with related parties, has little if any real presence in the Netherlands, and has tax, financial or legal motives and/or substantial international money flows or balance sheet positions. The concurrence of a number of these elements would point to the existence of ‘conduit arrangements’ or a ‘conduit company’.

Source: Government of the Netherlands

News item | 21-09-2021 | 15:54

The main changes are set out below.

Working from home

Many employees and employers want to make agreements so that working partly from home can continue, even after the coronavirus crisis. That is why from 1 January 2022 it will be possible to provide a tax-free home working allowance of up to € 2 per day. This is based on a calculation by the National Institute for Family Finance Information (NIBUD) of the average extra costs per day worked from home, for coffee, heating, etc. 

Employers already had the option of providing a tax-free allowance for setting up a workspace at home. A tax-free travel-to-work allowance of up to € 0.19 per kilometre will also continue to exist, for days on which an employee goes to the office. The employee and employer can make agreements about the number of days per week on which the employee works from home, so that the employer can pay a fixed allowance. The amount does not need to be adjusted if work is occasionally done at the office on a home working day, or vice versa. 

Housing

Homeownership-related tax rules and transfer tax will be made fairer from 1 January 2022.

Three changes will be made to the tax rules on homeownership. Unintended effects of the legislation will be eliminated, for example in cases where someone who already owned a home buys a home with a partner. Or where someone owns a home with a partner and the partner dies. 

Since 1 January 2021, buyers under the age of 35 have not had to pay transfer tax when purchasing their first home. Buyers aged 35 or over who are going to live in the home themselves pay 2%, while buyers who are not going to live there pay 8%. Under a new government measure, buyers who decide not to proceed with the purchase due to unforeseen circumstances, after signing the purchase contract but before the transfer of ownership, will not automatically pay the 8% rate. 

Where housing associations and property developers sell homes to first-time buyers or people with a lower middle income at a substantial discount and later buy them back from those individuals, they will no longer pay transfer tax from 1 January 2022 (this year they have to pay 8%). As a result, these homes will remain affordable for subsequent private buyers.

Purchasing power

purchasing power developments are distributed more evenly. The employment tax credit will, however, be phased out a little more slowly. 

As of 2 August 2022, parents will get nine weeks of paid parental leave. To partly cover the costs, the maximum income-related combination tax credit will be reduced by € 318 per year from 2022.
 

Climate measures

Measures to encourage the sale of zero-emission cars (such as electric cars and hydrogen cars) will continue next year.  These cars are selling better than expected and this is good for the climate. At the same time, it is costing the government more money than was set out in the National Climate Agreement. Under the agreement, such measures would as a result be scaled back from 2022 onwards. Since climate targets still present a major challenge, the government will continue these measures in 2022. This means that, where employees make private use of company cars, the reduction in the percentage of the vehicle’s value that is added to their taxable income will remain in place until the end of 2025.  

However, the maximum vehicle value (or ‘cap’) to which the reduction applies will be lowered sooner than set out in the National Climate Agreement. This means that the maximum vehicle value subject to the 6% reduction applicable from 1 January 2022 will be € 35,000, falling to € 30,000 from 2023. The percentage of the remainder of the vehicle value that will be added to taxable income will be the standard 22%. This will make less expensive, zero-emission cars attractive for the business market. These cars will also be of interest to private individuals on the second-hand market after the lease period.

The environmental investment tax credit percentages will be increased to give businesses an extra incentive to invest in innovative, environmentally friendly business assets. This will allow them to deduct more costs from their taxable profit. From 1 January 2022, the percentages will be increased from 13.5%, 27% and 36% to 27%, 36% and 45% respectively.

Measures for startups

Employers sometimes offer employees stock options instead of a normal salary. Young startups, for example, often offer stock options if they want to attract talented employees but do not yet have enough money to pay a commensurate salary. 

Tax is payable on the stock options since they are a form of salary. Tax is currently levied if an employee converts the options into shares. This means that employees (and the employer) have to pay tax immediately whereas they cannot always afford this and are not yet always allowed to sell the shares. From 1 January 2022, tax will therefore normally be levied only once the shares can be traded and money becomes available. Employees can also choose to leave things as they are. 

Tax avoidance

Tackling tax avoidance is one of this government’s priorities. The Tax Plan includes a measure that targets the cause of ‘hybrid mismatches’. Hybrid mismatches enabled businesses to deduct a payment (e.g. interest) from their taxes in one country without it being taxed in the other country, or to deduct a single payment in multiple countries. This policy measure had already been introduced, but it is now being modified so that it better aligns with corporation tax, dividend tax and withholding tax. It will still take effect on 1 January 2022.

Aside from the Tax Plan, another bill that targets the cause of mismatches has been sent to the House of Representatives. Transactions within a group must be conducted in the same arm’s length manner as would be done by independent parties in similar circumstances. In other words, the arm’s length principle must always be adhered to. However, because different countries apply this principle differently or even not at all, differences (‘mismatches’) can arise in international situations that result in part of a group’s profit not being taxed anywhere – i.e. double non-taxation. 

Changes in corporation tax offsetting

From 1 January 2022, around 20,000 Dutch businesses will only be allowed to offset advance payments of dividend tax and tax on games of chance (withholding taxes) against payable corporation tax. If no corporation tax is owed in a particular year, the Tax Administration will no longer provide a refund in that year. The business can offset the withholding taxes in a later year against payable corporation tax. This does not have to be done in the very next year; withholding taxes that have not been offset can be carried forward indefinitely to later years. This proposal is based on a ruling by the EU Court of Justice.

Source: Government of the Netherlands

News item | 21-09-2021 | 15:15

The economy is recovering quickly from the COVID-19 crisis and GDP will already reach its pre-pandemic level this year. Substantial economic growth is also forecast for next year. Public finances have come out of the crisis in good shape, despite sizeable support packages. Although the public debt rose during the pandemic, it remains under control thanks to the buffers that had already been put in place. This favourable picture is attributable to the enormous resilience of businesses, employees and society in general. The government’s substantial support packages have fulfilled their purpose: retaining jobs and minimising unnecessary bankruptcies. Nevertheless, the pandemic has had a huge impact on people’s lives in the Netherlands, especially on those who were ill, lost close friends or family members, or lost their livelihoods.

Key figures

Expected GDP growth is 3.9% in 2021 and 3.5% in 2022. According to estimates, the average rate of unemployment will be 3.4% this year, rising very slightly to 3.5% in 2022. Low unemployment is good news but also presents a challenge: businesses are finding it more difficult to recruit good staff. The national debt is estimated to be 57.7% in 2022, therefore remaining below the European Union limit of 60% of GDP. The budget deficit will also fall. While the government balance will be -6% this year, it is projected to stand at -2.4% in 2022.

Policy measures for 2022

Climate

If we are to curb climate change, more rapid action is needed. The longer we wait, the more costly the solutions will be. In this year’s Budget Memorandum, the government therefore sets out additional steps to reduce greenhouse gas emissions. In total, the government will invest an additional sum of over €6.8 billion in climate measures on top of existing spending on climate policy. Part of this investment is necessary to carry out the National Climate Agreement. The remainder of this package is directed at the further implementation of the Urgenda judgment. The government is aware that further climate policy measures are needed in the coming years to achieve the climate objectives. The action the government is now taking, in the light of its caretaker status, will contribute to this end.

Security and safety

Nor can we afford to delay in investing in security and safety, in view of the dislocating effect of crime that undermines society. From next year, €400 million will be provided annually to combat crime of this kind. In addition, extra funding will be allocated from 2022 onwards to enhance protection and security. The government will also increase the payments received by legal-aid lawyers in order to safeguard access to and the availability of legal representation. Also, the government will invest in the training of military personnel and the availability of sufficient munitions.

Extra money for building homes

From 2022, the government will make available €100 million a year over 10 years in order to increase the supply of homes in this period.

Tax cuts

The government will cut taxes and social insurance contributions by €226 million on a structural basis to boost the purchasing power of people on low incomes, sole earners and families. In addition, the government will reduce the landlord levy by €30 million a year from 2022.

The caretaker government is therefore addressing the most pressing issues for 2022. However, looking further ahead, structural problems remain in the fields of education, healthcare, benefits and the labour market. It is up to an incoming government to determine how to tackle them.

Source: Government of the Netherlands

News item | 22-04-2022 | 09:41

By promoting energy efficiency, speeding up the energy transition and increased energy imports from other countries, the Netherlands aims to save and replace in full the share of its energy needs that is met by Russian gas by the end of the year. In keeping with the rest of the European Union, the Netherlands will stop importing coal from Russia by 11 August 2022 at the latest. Over the coming weeks the government will seek to reach agreements with other countries in order to end the dependence on Russian oil as quickly as possible, while maintaining sufficient security of supply.

The government is also taking action to guarantee that gas storage facilities will be sufficiently filled by next winter, by introducing a guarantee scheme to mitigate the risks of high gas prices and having the Dutch state-owned company Energie Beheer Nederland (EBN) partially fill the gas storage facilities.

Phasing out fossil fuels

It is estimated that Dutch gas consumption can be reduced by around 9 billion cubic metres by 2025 by means of sustainability measures. This is more than the volume of gas imported from Russia (around 6 billion cubic metres). Expanding the LNG (liquefied natural gas) terminal in Rotterdam and installing a floating LNG terminal in the port of Eemshaven will enable the Netherlands to import an extra 8 billion cubic metres of LNG by the end of the year. This is dependent on the availability of sufficient LNG on the global market. Because the gas market is international, European agreements are needed to phase out Russian gas completely.

The European Union agreed as part of its fifth sanctions package that coal from Russia would no longer be bought in Europe after 11 August 2022. The government also wants to stop importing oil from Russia as soon as possible. The Netherlands has therefore requested the European Commission to do an analysis how Europe can wind down its purchases of Russian oil while maintaining sufficient security of supply.

Filling gas storage facilities

It is important that gas storage facilities are sufficiently filled in preparation for next winter, but this is currently not attractive for companies due to high gas prices and the associated risks of losses. The government is therefore setting up a guarantee scheme to encourage companies to do so. Under the scheme, it will reimburse the difference between current gas prices and gas prices next winter. In this way the government will assume part of the price risk. In addition, the government is instructing EBN to fill the Bergermeer gas storage facility up to 70% of its capacity, in so far as other companies do not do so despite the guarantee scheme. The estimated total cost of the measure is €623 million, depending on gas prices. It will be recovered, by means of an extra levy, from gas consumers who profit from the filling of the gas storage facilities.

Source: Government of the Netherlands

News item | 14-04-2022 | 15:15

The committee advised the government to allocate €5 billion from the National Growth Fund, with a proportion of this allocation (€3.7 billion) to be made subject to certain conditions. Extra steps are still required before a final decision is made on the additional €1.3 billion that has been reserved. The government has therefore allocated (in part conditionally) and reserved a total of €6.3 billion. On average, 50% of the investment in the projects will come from the fund, with the remaining 50% being provided by various other public and private sector parties. Today’s announcement means that total investment in this funding round could exceed €12 billion in the coming years.

‘Our current level of prosperity and public spending would not have been possible without past investments,’ noted Ms Adriaansens. ‘I want us to be able to continue investing in society in the future too. But to pay for that we need economic growth. The National Growth Fund makes that sustainable growth possible: tomorrow’s prosperity begins today.’

Speaking about the projects to be funded, Mr Dijsselbloem said ‘We have a nice varied package of proposals. Both big, bold projects like the Einstein Telescope and smaller – but high-impact – ventures like CROP-XR to foster the rapid and efficient development of climate-resistant crops. It is also essential, in the committee’s view, to invest in the quality of education and lifelong learning. Because we need more skilled professionals to ensure that projects are carried out. The investments will therefore be mutually reinforcing.’

National Growth Fund

The National Growth Fund was launched in 2020 to bring about a sustainable increase in the earning power of the Netherlands. The Fund invests together with initiators in projects that generate sustainable economic growth in the long term. Economic growth provides scope to continue investing in, for example, healthcare, education and climate action. Growth also means the country earns more, so that we can maintain our standard of living in the future.

The National Growth Fund was initially allocated €20 billion for investment in three areas: knowledge development; infrastructure; and research, development and innovation. Infrastructure was dropped from this list under the terms of the coalition agreement. But this does not apply to the current, second round of funding which was already under way at the time when the coalition agreement was reached. In the first round, the amount allocated (including conditional allocations) and reserved by the government for various projects totalled €4.1 billion. The first projects are now under way.

In collaboration with public and private parties, various government ministries submitted investment proposals to the National Growth Fund for the second round of funding. In the next round of funding – the third – the government wants to enable businesses, knowledge and educational institutions, public authorities, civil society organisations and other parties to submit their investment proposals directly to the National Growth Fund by means of a grant scheme. In March 2022 the House of Representatives approved the legislation that provides the basis for setting up the necessary grant scheme. The legislation is now awaiting the approval of the Senate.

Source: Government of the Netherlands

News item | 21-03-2022 | 19:38

Increase in one-off energy allowance for people on low incomes

At the end of 2021, the previous government announced it would set aside € 3.2 billion to reduce energy tax. It also presented plans for a one-off energy allowance of around € 200 per household to mitigate the impact of higher energy costs on people on incomes around the level of social assistance benefit. Older people on low incomes will also be eligible for the allowance. This one-off payment will now be raised to € 800 per eligible household. The government and municipalities will get this money to the people concerned as soon as they can. 

Reduction in VAT on energy and excise duty on petrol and diesel

The government plans to cut the rate of VAT on energy (natural gas, electricity and district heating) from 21% to 9% for six months from 1 July this year. This measure will bring down energy bills for households with average consumption by around € 140 over the period. The government also proposes reducing excise duty on petrol and diesel by 21%, from 1 April 2022 until the end of the year. This will lower the price of petrol by 17.3 cents per litre and that of diesel by 11.1 cents per litre.

More money for households to take energy-saving measures

At the end of last year, the previous government decided to earmark € 150 million to help households make their homes more sustainable. An additional € 150 million is now being provided to take extra energy-saving measures. Money is also being set aside for a campaign to raise people’s awareness of the different ways they can save energy.

Caribbean part of the Netherlands

€ 5 million is being made available to mitigate the impact of rising energy prices in the Caribbean part of the Netherlands. Detailed plans will be announced as soon as possible.

Covering the costs

The temporary package of measures will affect the budget. This additional package will cost a total of € 2.8 billion. The government considers it crucial that this cost is covered properly, to avoid passing on the bill to future generations. The government will fund the package in part from extra gas revenue. It will also use remaining funds from the Brexit Adjustment Reserve (BAR). A maximum of € 364 million in BAR funds is available.