Netherlands’ budget deficit rises to 3.4 percent

The Netherlands’ budget deficit will rise to 3.4 percent this year, which is again above the European standard of 3 percent, according to the spring memorandum of the Ministry of Finance. The coalition will mainly cover the extra expenditure by making companies and people with higher incomes pay more tax, a solution which drew criticism from entrepreneurs and praise from the FNV.

The Cabinet is also spending a significant amount of money to compensate people for high energy bills, at 6.4 billion euros. A total of 2.8 billion euros is also going to 60,000 people who had objected to the tax they had to pay on their assets in box 3, also known as savings tax. To compensate, corporate tax will also go up and, 2.2 billion euros will be cut from various funds, such as the nitrogen fund.

In any case, wealthy people will have to pay more tax in the future. “Strong shoulders will have to carry more burdens,” said Minister Sigrid Kaag (Finance).

Business associations VNO-NCW and MKB-Nederland said their supporters feel it is unfair that the bill for unjustly-paid savings tax is on the plate of entrepreneurs.  The organizations said the government could have chosen to allow the national debt to rise a little further, now that the Netherlands is “far below” the EU standards in that regard.

The government debt remains below the European standard of 60 percent. It stands at 52.9 percent and will increase to 54.9 percent in 2025.

Meanwhile, the FNV called the move to tax profits and wealth more heavily a “logical first step” to achieve a fairer distribution of wealth. “The money is accumulating in large companies and a small group of high earners, while the people who have to earn their money through work are still the most heavily taxed,” said FNV chairman Tuur Elzinga.  

In the spring memorandum, Minister Kaag indicated where the budget stands this year. It is the first time the government is already providing insight into plans it wants to implement in the coming years. Normally these plans only come out on Prinsjesdag. This new system gives the Tweede Kamer more opportunities to influence next year’s budget.

Several plans had already been leaked in recent days. Defense will receive an additional 2.2 billion euros so that the NATO standard is achieved in 2024 and 2025. This aligns with what the Tweede Kamer wanted and is a response to the war in Ukraine.

In addition, about 2.5 billion euros is being earmarked to raise the minimum wage in steps by 7.5 percent. This is “good news” for people with tight wallets, said Minister Karien van Gennip (Social Affairs). However, she doubts whether the increase is enough for everyone, because inflation is rising too fast. For the time being, the basic pension will grow along with that increase, the Cabinet has decided.

According to Kaag, the budget deficit will again fall below 3 percent in the coming years. It will then come out at between 2.5 and 3 percent is expected.

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