Additional €2 billion to fight poverty
The government will make an additional €2 billion a year available on a structural basis to support vulnerable households. This measure will prevent a rise in the number of people living in poverty and reduce the number of children growing up in poverty. Most of this expenditure will be funded from redistribution, with people on higher incomes paying slightly more tax. Although movement in the level of the national debt will be limited for the time being, the increase in the budget deficit requires attention. The budget deficit is expected to be 2.9% in 2024.
In the 2024 Budget Memorandum the government follows up on the agreements set out in the 2023 Spring Memorandum. Money has therefore been earmarked for tackling climate issues, strengthening the rule of law and raising the minimum income in the Caribbean part of the Netherlands. In addition, parents impacted by the failings in the childcare benefit system, people living in the Groningen earthquake zone, and Ukrainians – for all their differences – all remain entitled to undiminished support from the government.
‘It is appropriate, given its caretaker status, that the government show restraint,’ said Minister of Finance Sigrid Kaag. ‘We nevertheless have a responsibility to strive for a decent standard of living for all. Now and in the future. We will do what has to be done until a new government takes office. We have therefore put together a balanced package which includes measures aimed at helping the most vulnerable people in society.’
The State Secretary for Tax Affairs and the Tax Administration, Marnix van Rij, said ‘We need to collect tax in order to fund government spending. On education, infrastructure and security. We are also continuing our efforts to make the tax system simpler for members of the public, businesses and the implementing agencies.’
‘The government will continue to work on solving the problems people run up against,’ said the State Secretary for Benefits and Customs, Aukje de Vries. ‘I am pleased that, despite our caretaker status, this government is presenting a targeted package of measures to support people’s incomes. And we will continue our work to resolve the persistent problems in the benefits system and, for businesses that trade internationally, at Customs.’
Purchasing power and poverty measures
The purchasing power of people on low incomes is an issue that has the government’s close attention. Most people will experience an increase in purchasing power next year – by 1.7% for the average person in the Netherlands. But there are differences between groups in the development of purchasing power. One way to prevent this through the tax system is to increase the employment tax credit by €115. As a result, people in work who receive between the minimum wage and a modal income will keep more of the money they earn.
Families with children will also be better off. Supplementary child benefit will rise by up to €750 for the first child, by up to €883 for the second and subsequent children and by €400 for children between 12 and 17 years of age. The term ‘benefit partner’ will be redefined from 2025. This means that, for example, grandparents who move in with their children to live in an informal care situation will no longer have their benefits cut.
Social security benefits will increase fully in line with the minimum wage, because the double tax credit for social assistance benefit recipients will not be reduced in 2024. Free breakfast will again be provided at schools attended by a large proportion of children from financially vulnerable households – €165 million will be made available to fund this in the coming year. Housing benefit will be raised by up to €416. And people who cannot pay their energy bills can apply for assistance from the Temporary Emergency Fund for Energy until the end of March 2024.
Owing to these measures, the number of people living in poverty in the Netherlands will remain the same at 4.8% of the population. This is 1.3% lower than when the government took office. The number of children living in poverty will fall to 5.1%, 2.1% lower than when the government took office.
The 2024 Budget Memorandum is the budget for next year. Expenditure in 2024 is expected to exceed €430 billion and revenue will be 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%.
The debt level will rise in the coming years, to 52.9% in 2028. This issue will continue to command the government’s attention, since it is important for future generations that the public finances remain sound. This is also the reason why the government has fully funded the expenditure on the purchasing power package.
2024 Tax Plan
This year the Tax Plan contains necessary measures for society and the tax system, including key measures to support purchasing power and fight poverty, as well of course as the measures needed to pay for this expenditure. This extra spending will be partly funded by windfalls in 2024.
But due to financial setbacks in other areas, it will also be necessary to raise additional tax revenue. Consequently, people on higher incomes will pay more tax, in part because the level at which the top rate of tax applies will be reached sooner. The government is also raising excise duties on alcohol, smoking tobacco and cigarettes, partly to encourage healthier lifestyles. Because of the fall in revenue from box 3 income under the current system, the capital yield tax allowance will not be indexed to inflation and the tax rate rise to 34% is being brought forward by a year. In addition, the SME profit exemption will be reduced from 14% to 12.7%. As a result, the difference in the tax treatment of employees and the self-employed will become smaller.
The government will also take measures to improve and simplify the tax system. From next year, employees can receive a higher tax-free allowance for travel costs from their employer. The existing box 3 system will be improved by treating more forms of wealth as savings.
The government will remove the financial incentive for providers of legal assistance to lodge objections on behalf of individual citizens and businesses. This includes objections to decisions on the assessed value of property under the Valuation of Immovable Property Act (WOZ) and car and motorcycle tax (BPM) returns. The government is also improving or abolishing certain tax relief schemes, including in relation to motor vehicle tax (MRB) and BPM. In addition, the government is opting to retain the business succession scheme (BOR). But it will be improved in a number of respects so that it better fulfils its purpose, namely preventing the continuity of a business from being jeopardised upon its transfer.
Business taxpayers who unintentionally make an error in a customs declaration will no longer face criminal prosecution. Instead, they will receive an administrative fine. The period over which a retrospective assessment can be imposed will change from five to three years.
Making the tax system greener is an important part of the Tax Plan. A substantial task faces us as a society regarding the climate. This means we cannot afford to stand still when it comes to the climate commitments we have made. The government will therefore take steps, where possible and effective, to phase out tax exemptions and reduced rates that apply to the use of fossil fuels.
Caribbean Netherlands 2024
The 2024 Tax Plan also includes the 2024 Tax Plan for the islands of Bonaire, St Eustatius and Saba. The plan for these islands includes measures to improve and simplify the tax system. The customary pay for director-major shareholders will be amended. An additional €32 million is being made available annually on a structural basis to improve purchasing power in the Caribbean part of the Netherlands.