Tax plan cuts taxes on labour
A key aim of the 2016 Tax Plan is to reduce the tax burden. Next year the government will cut taxes on labour by €5 billion. This will generate extra jobs and higher economic growth.
According to the Tax Plan, which State Secretary for Finance Eric Wiebes sent to the House of Representatives on Budget Day, the structural tax cut will benefit both employees and employers.
From next year, employees’ take-home pay will increase. The rates in the second and third tax bands will be reduced, while the employed person’s tax credit will rise sharply. The government will also raise the ceiling of the third tax band. On the other hand, the general tax credit for higher incomes will be phased out.
Employees with young children will benefit from an increase in the income-related combination tax credit and childcare benefit. Both measures will make it easier to combine a paid job with caring for children.
Employers will be given an incentive to hire people at the lower end of the labour market. From 2017, employers will receive up to €2,000 per year for each employee whose salary is around the minimum wage.
The Netherlands Bureau for Economic Policy Analysis (CPB) has calculated that cutting the tax burden on labour by €5 billion will already create 21,000 jobs within two years. In the longer term, it will generate up to 35,000 extra jobs.
Simplifying the tax system remains a necessity. The 2016 Tax Plan contains a series of minor simplifications, including the merger of two innovation schemes. The government is also examining further simplifications for the period after 2016. The idea is to take measured, well-thought-out steps each year with a view to improving the tax system.
Capital yield tax
The Tax Plan also sets out the government’s proposal to reform the capital yield tax in box 3 (savings and investments). This is to ensure that, on average, the amount taxed is closer to the yield that taxpayers actually earn. The capital yield tax allowance will be raised to €25,000. The flat rate of 30% will be maintained.
Gift tax exemption
The tax exemption for a one-off gift for an owner-occupied home will be increased and the conditions will be relaxed. From 2017, the exemption ceiling will be raised to €100,000. In addition, the condition that the gift must be made by a parent to a child will be scrapped. The condition that the recipient must be between 18 and 40 years of age will be retained.