One sentence from Pieter Omtzigt’s election manifesto stands out on Tuesday. This is a tax benefit for family businesses that Omtzigt has been questioning for years. Yet it says: “The fiscal Business Succession Scheme (BOR) for family businesses will be retained as a guarantee for the continuity of employment and activity.”
It is a reminder of a small but noisy issue that will take place from 2021 onwards. Ingredients: fiscal support to often wealthy Dutch people, an effective lobby, donations to political parties, and distrust of these donations by, yes, Pieter Omtzigt.
The scheme in question, the so-called BOR, aims to guarantee the continuity of family businesses. If business assets change hands within a family via an inheritance or donation, for example from parents to children, a low tax rate applies.
The scheme costs around 400 million euros annually. Small change on the entire national budget. But the Council of State was already critical in 2016. And Finance officials writing in 2020 that large assets in particular benefit: in the period 2010-2016, 300 people had a tax benefit of 1.1 billion euros.
Progressive parties therefore want to reduce or abolish the BOR. And just before his farewell to the CDA, summer 2021, Omtzigt also sounded the alarm. Funders who have deposited one million euros into the party’s election coffers are ensuring that the CDA is making the preservation of the BOR a spearhead in the 2021 campaign. “I have great difficulty with that,” writes Omtzigt. The focus is on an entrepreneur who fulfills four roles simultaneously in the CDA campaign (‘Get going now’ with Wopke Hoekstra): donor, advisor, fundraiser and lobbyist (for the BOR). The CDA’s own integrity rules do not allow it – but the party only notices this when it is too late.
Big alarm
As an independent Member of Parliament, Omtzigt will later, in November 2021 and March 2022, submit motions to “as soon as possible” abolish a tax construction in which entrepreneurs benefit twice from the BOR. They don’t make it. He says March 2022 in the House: “There have been serious incidents about the financing of political parties in recent years.”
PVV member Martin Bosma: “Does Mr Omtzigt accuse certain political parties of corruption? It sounds quite alarming.”
Omtzigt: “I would like it if donations were capped, because I have seen lobbies for the BOR from several parties.”
Two months later, May 2022, the survival of the BOR will come under further pressure. It CPB concludes that the scheme is ineffective: the benefit to entrepreneurs is ‘in many cases not necessary’. GroenLinks and PvdA are launching an initiative in which most of the benefits of the BOR will be removed. In the debate, March this year, there is no majority. Omtzigt does not participate in the debate. An important opponent of the plan is tax specialist Folkert Idsinga, a VVD member who will switch to NSC in September. In the debate in March, he calls family businesses “the backbone of our economy”, good for “sustainable jobs for 3 million” people. The GL-PvdA plan is therefore “bad”. Tom van der Lee (GroenLinks) says he is exaggerating. “You act as if masses of family businesses are collapsing due to budget cuts of several hundred million. That is not proportional.”
“You pay 20 percent tax on your inheritance, but people with a company pay 2 to 3 percent”
A month after the failed left-wing attempt, the government takes action. State Secretary Marnix van Rij (Finance, CDA) also wants to simplify the BOR, but less far-reaching: 90 million euros can be structurally reduced. Prominent directors of family businesses, such as Peer Swinkels (Bavaria) and Pieter van Oord (Van Oord dredgers), will visit the Chamber in June because this plan would pose “a serious threat”. They present an alternative of which Idsinga, then VVD, has a positive impression, it said Financial Daily.
Van Rij, and Idsinga, rejected that alternative at the end of June gets two motions passed shortly afterwards are in line with the criticism of the family business lobby. This includes their fear that family businesses will soon have “insufficient liquidity” to pay their tax bill due to the government’s plans.
Omtzigt chooses a few days earlier, June 29, in a critically acclaimed speech at the Festival of Journalism, a different angle: “Has anyone ever looked at the government parties VVD, CDA and D66, which received tons of money for the elections?” He again quotes the BOR: “You pay 20 percent of your tax inheritance but people with a business 2 to 3 percent. Have you seen that the BOR lobby donated hundreds of thousands of euros and also wanted the BOR not to be adjusted?” He appeals to journalism: “I have not yet seen the research into this in the Netherlands.”
The lobby is watching
In the autumn, Omtzigt’s investigative attitude in this file also changes. When the House starts discussing the bill for the reduction of the BOR, Omtzigt is mainly concerned with other tax matters. However, in October he asked about the implementation of the adopted motions by Folkert Idsinga from July. His switch from VVD to NSC became official in September.
The coalition parties previously agreed to the reduction of the BOR, but after the fall of the cabinet, VVD, CDA and CU are still trying to accommodate family businesses. The lobby is watching. And last Thursday night, at the last minute of the election recess, VVD and CDA succeeded in reducing the BOR almost half to undo.
But more importantly: the attack on the BOR, fueled by the Council of State (2016), Finance (2020), the CPB (2022), GL-PvdA and Omtzigt (from 2021), has long been repulsed. This has been evident from the election manifestos in recent months. GL-PvdA continues to have objections, but other governmental parties – VVD, BBB, CDA and CU – write that they want to keep the BOR. And NSC is joining this this week. But why? In NSC they explain that the party is a supporter of Rhenish thinking. Family businesses assume the long term. They act responsibly. They are rooted in society. You can speak to them. “That’s what’s behind it.”
It is also a fact that Omtzigt, unlike VVD, CDA and CU, deliberately voted for the complete retrenchment of the BOR this week – in response to the abuse he mentioned earlier. At the same time, lobbyist Stefan Tax of the family businesses cannot suppress his satisfaction. On LinkedIn this week, he applauded the fact that the NSC program calls family businesses “the cornerstone of our economy” and recognizes the importance of the BOR for “the continuity of employment and activity”. “Beautiful!”, he writes. It says below a photo of himself with a smiling Omtzigt.