There are currently 116 tax incentives in the Netherlands. But can this be considered a blessing? According to the results of the study of the Ministry of Finance, it turns out that no. Outgoing Secretary of State Van Rij commented on the results of the study in a letter to Parliament.
The Ministry of Finance tested 73 tax breaks:
- 11 work properly,
- in 41 cases, the effectiveness of benefits could not be established,
- in 21 cases they were ineffective.
Why are tax breaks used?
Tax incentives are a frequently used tool to stimulate certain types of activities or financial support for a certain category of the population.
Examples of Ineffective Benefits
Among the ineffective incentives are the mortgage interest deduction (hypotheekrenteaftrek), preferential rates for gift tax (schenkbelasting) and inheritance tax (erfbelasting), as well as the business succession scheme (bedrijfsopvolgingsfaciliteit, BOR).
Why are tax breaks not always a boon?
According to Secretary of State Van Ruy, a large number of tax breaks:
- overcomplicates the country's taxation system,
- leads to higher tax rates,
- requires high costs for implementation and enforcement,
- makes the tax system more vulnerable to fraud and abuse.
Going forward, the Finance Ministry is urging parliamentarians to be wary of new tax incentives and to be critical of those that are already in place but not working. In particular, representatives of the ministry recommend revising the benefits that were found to be ineffective according to the results of the study of taxonomy-lgoty-ne-rabotayute, to optimize or, possibly, cancel them.
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Publication Date: 02.08.2023
