News item | 19-09-2023 | 15:33
The government is structurally releasing an additional €2 billion per year to support vulnerable households. As a result, the number of people in poverty does not increase and the number of children growing up in poverty decreases. This is largely paid for through redistribution, with people with a higher income paying slightly more tax. Although the development of the national debt remains limited for the time being, the increase in the budget deficit requires attention. This budget deficit is expected to amount to 2.9% in 2024.
In the 2024 Budget Memorandum, the government implements the agreements from the 2023 Spring Memorandum: resources are made available for tackling the climate, for strengthening the rule of law and for improving the social minimum in the Caribbean Netherlands. The parents who were affected by the benefits affair, the people in the Groningen earthquake zone and the Ukrainians are all – no matter how different – entitled to the government’s continued support.
Minister Kaag: “Due to the outgoing status, the cabinet is exercising restraint. That does not alter the fact that we have a responsibility to strive for a good life for everyone. Now and in the future. Until a new cabinet takes office, we will take the necessary measures. That is why we have put together a balanced package with an eye for vulnerable people in society.”
State Secretary Van Rij: “Collecting tax money is necessary so that we as a government can spend. For education, for infrastructure and for safety. We will also continue to make the tax system better and simpler for citizens, entrepreneurs and the executive authorities.”
State Secretary De Vries: “The government continues to work on solutions to problems that people encounter. I am pleased that, even though we are out of office, this government is presenting a targeted package of income support measures. We will also continue to solve bottlenecks in the benefits system, but also at Customs for entrepreneurs who trade across the border.”
Purchasing power and poverty measures
The government is paying attention to the development of the purchasing power of lower incomes. Purchasing power will increase for most people next year. The average Dutch person will improve by 1.7%. There are, however, differences in purchasing power development between groups. One of the ways to prevent this through taxes is to increase the employment tax credit by € 115. This means that workers with an income between the minimum wage and an average income will have more net money left over.
Families with children are also making progress. The child budget will increase by a maximum of €750 for the first child, by a maximum of €883 for the second and subsequent children and by €400 for children between 12 and 17 years old. From 2025, the government will adjust the allowance partner concept. This ensures, for example, that grandparents who go to live with their child in an informal care situation will no longer have their allowances reduced.
Furthermore, benefits will increase fully with the minimum wage, because the double tax credit in social assistance will not be phased out in 2024. And next year there will also be a free school breakfast at schools with many children from financially vulnerable households. €165 million will be released for this. The rental allowance will increase by a maximum of € 416. And people who cannot pay their energy bill can appeal to the Temporary Energy Emergency Fund.
Due to these measures, the number of Dutch people living in poverty remains the same at 4.8% of the population. That is 1.3% lower than at the start of the cabinet. The number of children growing up in poverty drops to 5.1%. That is 2.1% less than at the start of the cabinet.
Public finances
The 2024 Budget Memorandum is the budget for next year. Expenditure in 2024 is expected to be more than € 430 billion, income more than € 402 billion. The budget deficit is expected to reach 2.9% of gross domestic product (GDP) in 2024. The national debt will amount to 47.3% of GDP in 2024. This is well below the European limit value of 60%.
The debt will increase in the coming years, reaching 52.9% in 2028. The government will continue to pay attention to this, because it is important for coming generations that public finances remain healthy. That is why the government has provided coverage for the purchasing power package.
Tax Plan Package 2024
This year’s Tax Plan contains necessary measures for society and the tax system. Purchasing power and poverty reduction are an important part of this. And of course the measures needed to pay for these expenses. These will be partly paid for by windfalls in 2024.
At the same time, additional tax revenues are needed due to financial setbacks in other areas. That is why people with a higher income will pay more taxes. Partly because they fall into the highest tax rate slightly earlier. We are also increasing – partly for health reasons – the excise duty on alcohol, smoking tobacco and cigarettes. Because the current system yields less in box 3, the tax-free allowance in box 3 is not indexed and the tax rate rises to 34% a year earlier. Furthermore, the profit exemption for SMEs will be reduced from 14 to 12.7%. This also reduces the tax difference between employees and self-employed persons.
The government is also taking measures to make the tax system better and simpler. From next year, employees can receive a higher tax-free allowance for travel expenses from their employer. The current box 3 system will be improved by considering more forms of capital as savings.
The government is also removing the financial incentive for legal assistance providers to object on behalf of citizens and companies. Including against WOZ decisions and purchase tax returns (bpm). The government will also improve or abolish a number of tax schemes, such as motor vehicle tax and purchase tax (bpm). In addition, the cabinet has chosen to maintain the business succession scheme (BOR). But it should be better suited to its purpose on a number of points. Namely: preventing the survival of a company from being jeopardized by a business transfer.
Entrepreneurs who unintentionally make a mistake in their customs declaration will no longer be prosecuted for this error. They will instead receive an administrative fine. The period for which further assessments will be made will go from 5 to 3 years.
Greening the tax system is an important part of this Tax Plan. The climate challenge we face as a society is significant. That is why we cannot afford to stand still due to the agreements made in the area of climate. The government is therefore taking steps, where possible and effective, to phase out tax exemptions and reduced rates for the use of fossil raw materials.
Caribbean Netherlands 2024
The 2024 Tax Plan also includes the ‘BES Islands 2024’ Tax Plan for the islands of Bonaire, Sint Eustatius and Saba. This contains measures to make the tax system better and simpler. The usual salary for director-majority shareholders will also be adjusted. An additional €32 million will be released structurally per year to improve purchasing power in the Caribbean Netherlands.