Dutch Government Unveils Extensive Tax Plan 2024: A Deep Dive into the Proposals

Dutch Government Unveils Extensive Tax Plan 2024: A Deep Dive into the Proposals

A Comprehensive Approach to Economic Development and Equality

The Dutch government, under the guidance of Staatssecretaris Van Rij of Financiën Fiscaliteit, has recently laid out the Tax Plan 2024 before the Dutch House of Representatives. The objective of this plan is multifaceted, it aims to bolster purchasing power, combat poverty, streamline the tax system, and meet climate goals. The government plans to cover the additional spending through windfalls in 2024 and other measures designed to maintain tax revenues.

Supporting the Vulnerable: A Focus on Low-Income Individuals

In an effort to prevent economic hardship among low-income individuals, the government has allocated 2 billion euros to support those who are financially struggling. To ensure that people around the minimum wage can net more per month, the labour discount will be increased by 115 euros. The government will also halt the halving of the young disablement discount and freeze the phasing out of the double general tax credit for people on welfare in 2024.

Adjustments to Income Tax Rates

The government has also decided to not fully index the starting point for the top rate of income tax, the second and third tiers for pensioners, with inflation but with 3.55%. This decision means that higher-income individuals will pay slightly more income tax. However, they will also see an increase in purchasing power next year. The 1.6 billion euros generated from this measure will cover the compensation of lower incomes.

Facilitating Commute and Encouraging Public Transport Use

In a bid to encourage the use of public transport, the tax-free travel allowance will be increased from 21 to 23 cents per kilometre. Employers will also find it easier to issue public transport subscriptions to employees. The exemption for public transport subscriptions and off-peak cards will be expanded, and no tax will be due if the employee uses the public transport card for business travel.

Fiscal Measures for Multinationals and SMEs

The government anticipates financial setbacks in the estimated revenue from the global minimum profit tax for multinationals of 15%. To maintain healthy public finances and prevent passing burdens onto future generations, the government has decided to lower the SME profit exemption from 14% to 12.7%. This reduction will lessen the difference in tax treatment between employees and entrepreneurs in income tax.

Promoting a Healthier Lifestyle

In an effort to promote a healthy lifestyle, the government has decided to increase the excise duties on cigarettes and shag. Starting from April 1, 2024, a pack of cigarettes (20 pieces) will cost an average of 10.70 euros, and a pack of shag (50 grams) 24.14 euros, including VAT. The excise duties on alcohol are also indexed once. These measures aim to discourage unhealthy choices.

Improving the Tax System

The government is also implementing measures to make the tax system more balanced and simpler. It intends to maintain the Business Succession Scheme (BOR) and the substantial interest deferral scheme (DSR ab) but in a modified form. These changes will help prevent a company’s continuity from being endangered due to gift or inheritance tax. The government is implementing a total of six measures to make the scheme more robust and simpler in the coming years.

Addressing the Climate Challenge

In response to the climate challenge that society faces, the government plans to implement several measures. This includes agreements arising from the greenhouse horticulture covenant, including the CO2 levy for greenhouse horticulture from 2025 and the abolition of the reduced energy tax rates for greenhouse horticulture. The minimum CO2 price for the electricity sector and industry will increase to 51.70 euros per ton of CO2 from 2024. The exemptions on the energy and coal tax for producers of iron and building materials will also be abolished.