12 hours Ago
Benefit Cuts Shelved, Savings Still Expected
On Tuesday, the government said social security cuts are off the table for now while it talks with trade unions about reforming the WIA disability benefit. Prime Minister Rob Jetten and Finance Minister Eelco Heinen were clear, though, that these talks still have to deliver savings on benefit payments. Jetten said that if the results fall short, the Cabinet will bring forward additional proposals.
The Cabinet is currently dealing with a €3 billion shortfall. One backup option is to scale back the price adjustment mechanism across several ministries. In plain terms, their budgets would stop keeping pace with inflation in the coming years. They would have less money to spend and would be forced to make cuts. Defense and Justice and Security would be spared, and Foreign Affairs would barely feel it. The Ministry of Education, Culture and Science would take the biggest hit, losing €1.2 billion from 2031 out of a total budget of €57 billion.
Box 3 Changes Pull In More Taxpayers
Jetten and Heinen also announced that the Cabinet wants to change the Box 3 tax as early as 2028. Under the new approach, savings and investments would be taxed on actual distributed gains rather than paper gains. More people will end up paying it, since the tax-free asset allowance will fall from roughly €60,000 to just over €30,000.
The reform will be funded by temporarily lowering the tax rate in Box 2, which covers income from substantial shareholdings, starting next year. The Cabinet hopes this will encourage business owners to take more profit out of their companies. The government also plans to tighten the rules on borrowing from your own private limited company, cutting the limit from €500,000 to €100,000 over the coming years.
Purchasing Power and the Parliamentary Debate
To support household purchasing power, the Cabinet is scaling back the increase in the earned income tax credit and raising the income threshold for the top tax bracket. The government hopes this mix of measures will win support from both left-wing and right-wing parties. The Tweede Kamer, the lower house of the Dutch parliament, will debate the financial plans today and tomorrow.
