We already had our suspicions. This has now been confirmed by the CPB: the Rutte III Cabinet’s plans will have virtually no impact on the tax burden. We have taken this information from an article in the Financieel Dagblad.
Tax burden
The tax burden arising from income tax is taken into account. Pay-as-you-earn tax is also considered, but this is offset against income tax in your tax return. Specifically, this concerns income from employment and property (Box 1). After all, a proportional rate applies to income from a substantial interest in a company (box 2). The same applies to income from savings and investments (box 3), although there has been a slight degree of progression in this since 2017 due to the calculation of the flat-rate return.
Under the Rutte III plans, the income tax rate is set to fall. In 2018, you will still pay 51.95% in tax on the portion of your income in Box 1 above €68,507. This will be reduced to 49.5%. And on your income between €20,142 and €68,507, you will pay 40.85% in tax in 2018. This will be reduced to 36.93%.
Lower tax rates result in a lower tax burden. However, the tax burden is not determined by the rate alone. The two most important factors, apart from the rate, are:
- tax credits: these credits are being further phased out by Rutte III;
- the tax base: this is being increased by Rutte III (partly because tax deductions are no longer applied at the highest rate).
The CPB confirms that its research shows that, when the measures are considered as a whole, the tax burden for most Dutch people remains virtually unchanged.
Gorge
Another contentious issue is the disparity between single-earner and dual-earner households. A household in which one person is the sole breadwinner pays considerably more tax than a household in which exactly the same income is earned by two people.
The conclusion of a recent debate in the House of Representatives is that this gap will not narrow during the Rutte III term of office. This requires the attention of future governments.
Planning
Of course, the CPB only looks at the broad picture. Depending on the composition of your household and other personal circumstances, your tax burden may well rise or fall after 2018. It is therefore wise to keep an eye on how the Rutte III government’s plans are actually translated into legislation. After all, a political debate on this matter is yet to take place. Once the outcome of that discussion is finalised, you can assess whether it makes sense to adjust your tax and financial arrangements. However, that clarity will not be available until the final quarter of 2018. We are eagerly awaiting the plans that Rutte III will present on Prinsjesdag 2018.