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News | 19-09-2023 | 15:44
The government will provide an additional €2 billion in structural funding per year to support vulnerable families. This measure will prevent the number of poor people from increasing and reduce the number of children growing up in poverty. Most of the spending will be financed through redistribution, with high-income earners paying slightly more in taxes. Although changes in the level of national debt are limited for the time being, the increase in the budget deficit needs attention. The budget deficit is expected to reach 2.9% in 2024.
In the 2024 budget memorandum, the government will implement the agreements reached in the spring 2023 memorandum. As a result, the government has allocated funds to address climate issues, strengthen the rule of law and increase the minimum income in the Caribbean Netherlands. In addition, parents affected by shortcomings in the childcare benefit system, residents living in the earthquake zone of Groningen and Ukrainians (despite all differences) remain entitled to government support that is not reduced.
“Given its caretaker position, it is appropriate for the government to show restraint,” said Finance Minister Sigrid Kaag. “But we have a duty to fight for a decent standard of living for all. That is true now and in the future. We will do what needs to be done until a new government takes office. We have therefore prepared a balanced package that includes measures aimed at helping the most vulnerable in society.”
“We need taxes to finance government spending. For education, infrastructure and security. We will also continue to work to make the tax system simpler for the public, businesses and executive bodies,” said Marnix van Rij, State Secretary for Tax Affairs and Tax Administration.
“The government remains committed to addressing the problems people are experiencing,” said Aukje de Vries, state secretary for welfare and customs. “I am pleased to see that, despite our caretaker status, this government has introduced a package of targeted measures to support people’s incomes. We will continue to work on addressing long-standing problems in the welfare system and, for businesses trading internationally, in customs.”
Purchasing power and poverty measures
The purchasing power of people on low incomes is something the government is paying close attention to. Most people will see an increase in their purchasing power next year – the average Dutch person will see an increase of 1.7%. But there are differences in how purchasing power develops across groups. One way to prevent this through the tax system is to increase the employment tax credit by €115. That way, employed people with an income between the minimum wage and the average income will keep more of what they earn.
Families with children will also benefit. Supplementary child benefit will increase by up to €750 for the first child, up to €883 for the second and subsequent children, and €400 for children aged 12 to 17. From 2025, the term “welfare partner” will be redefined. This means, for example, that grandparents who live with their children in informal care settings will no longer have their benefits cut.
Social security benefits will increase in full accordance with the minimum wage, as the double tax credit for recipients of social assistance will not be reduced in 2024. Schools with a large proportion of children from economically disadvantaged families will once again offer free breakfasts – €165 million will be made available next year to finance this. Housing allowance will increase to €416. People who are unable to pay their energy bills can apply for assistance from the Temporary Emergency Fund for Energy until the end of March 2024.
Through these measures, the proportion of the Dutch population living in poverty will remain unchanged at 4.8%, a decrease of 1.3% from when the government was in power, and the proportion of children living in poverty will drop to 5.1%, a decrease of 2.1% from when the government was in power.
public finance
The 2024 Budget Memorandum is the budget for next year. Expenditure in 2024 is expected to be over €430 billion and revenues over €402 billion. The budget deficit is expected to be 2.9% of gross domestic product (GDP) in 2024. The national debt will be 47.3% of GDP in 2024, well below the EU threshold of 60%.
Debt levels will rise in the coming years, reaching 52.9% by 2028. This issue will continue to concern the government, as the health of public finances is vital for future generations. This is why the government is fully funding spending on the purchasing power plan.
2024 Tax Plan
This year’s tax package contains necessary measures for the social and tax systems, including key measures to support purchasing power and fight poverty, and of course the measures needed to pay for this additional spending, which will be partly financed by the 2024 windfall.
But additional tax revenues will be needed because of fiscal difficulties in other areas. As a result, people on higher incomes will pay more tax, partly because the applicable level of the top tax rate will be reached sooner. The government has also increased excise duties on alcohol, smoking and cigarettes, partly to encourage healthier lifestyles. As a result of falling income from box 3 income under the current system, capital gains tax relief will no longer be indexed to inflation, and the increase in the tax rate to 34% will be brought forward by one year. In addition, the profit exemption for small and medium-sized enterprises will be reduced from 14% to 12.7%. As a result, the difference in tax treatment between employees and the self-employed will become smaller.
The government will also take steps to improve and simplify the tax system. From next year, employees will be able to receive a higher tax-free allowance for travel expenses from their employers. The existing Box 3 system will be improved to treat more forms of wealth as savings.
The government will remove the financial incentive for legal aid providers to file objections on behalf of individual citizens and businesses. This includes objections to property valuation decisions under the Real Property Valuation Act (WOZ) and to car and motorcycle tax (BPM) returns. The government is also improving or abolishing certain tax relief schemes, including those related to motor vehicle tax (MRB) and BPM. In addition, the government has chosen to retain the Business Succession Scheme (BOR). But it will be improved in a number of ways so that it better serves its purpose, which is to prevent the continuity of a business from being jeopardized when it is transferred.
Corporate taxpayers who make unintentional customs declaration errors will no longer face criminal prosecution. Instead, they will be subject to administrative fines. The period for retroactive assessment will be changed from five years to three years.
Making the tax system greener is an important part of the tax plan. We as a society face a huge task on the climate. This means we cannot stand still on meeting the climate commitments we have made. The Government will therefore take steps, where possible and effective, to phase out tax exemptions and reductions that apply to the use of fossil fuels.
Caribbean Netherlands 2024
The 2024 tax package also includes a 2024 tax package for Bonaire, Sint Eustatius and Saba. The plans for these islands include measures to improve and simplify the tax system. The customary remuneration of directors and major shareholders will be revised. An additional €32 million in structural funding will be provided each year to increase purchasing power in the Dutch Caribbean.
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