On December 8, 2015, the Deputy Minister of Finance, Mr. Wiebes, announced that he had found sufficient support to get the 2016 Tax Plan through the Upper House. The government parties VVD and PvdA have reached agreement with D66 on this. The CDA parliamentary party had already voted in favor of the 2016 Tax Plan in the Lower House. In response to the discussions that were held, the Deputy Minister has proposed additional measures in respect of the 2016 Tax Plan, which will be presented to the Lower House as soon as possible in the form of a proposal to amend the bill (novelle). He summarized these measures in a letter to the Lower House.

Labor tax credit

As of 2017 the government will slow down the pace at which the labor tax credit is reduced. This will mean a lower tax burden for employed persons with incomes of approximately EUR 35,000 up to EUR 125,000.

Elderly person's tax credit

As of 2017, an additional EUR 100 million will be available for the elderly person’s tax credit on a long-term basis. This is on top of the increase in the elderly person's tax credit, once again by EUR 100 million, that was included in the fourth Memorandum of Amendment to the 2016 Tax Plan.

Box 3

In 2016 the exempted capital in Box 3 will be increased by EUR 3,000, on top of the usual adjustment for inflation. Following indexation, the exempted capital amounts to EUR 24,437. As a result, the proposed change to Box 3 in 2017, which brings the exempted capital to EUR 25,000, is largely being realized in 2016.

Cover

The measures from the novelle and the other measures are covered in the budget by reducing the tax rate in the second and third brackets for payroll tax and personal income tax purposes in 2016 by 0.2% points and in 2017 by 0.3% points less compared to the original bill. With effect from January 1, 2016 the tax rate for the second and third brackets thus becomes 40.4%.

Additional measures

On top of the novelle and the fourth memorandum of amendment, the government will also take a number of additional measures. These include:

  • investment in sustainable built environment;
  • plan for the phasing out of coal-fired power plants;
  • intensification of the childcare allowance.

Expansion of the municipal tax area

Before the summer of 2016, the government will also produce a preliminary draft bill that can serve as the basis for a bill to shift EUR 4 billion from income tax to municipal taxes in 2019. For the government, the preconditions for this shift from income tax to municipal taxes are that municipalities do not get involved in incomes policy, that the burden is not unilaterally shifted towards specific groups, that the system is easy to implement and that the total tax burden (central plus local government) remains the same. The method of taxation will also be covered. The bill may also include measures to abolish a number of minor municipal taxes.

Next steps

With the cooperation of both Houses of Parliament, the Minister hopes that the novelle will be put to the vote in both Houses before the Christmas recess. The vote on the 2016 Tax Plan in the Upper House is scheduled for December 22, 2015.

Click here to download the memorandum in pdf format