Abolition dividend tax, reconsidered

Iris Veldman
Iris Veldman is a second year Economics and Business Economics student (EBE) who recently joined the Asset|Blog Committee.

The abolition of the dividend tax in the Netherlands has been the topic of discussion in the house of representatives for the last couple of months. A big player in the decision was Unilever, who would possibly move their headquarters to the Netherlands if the dividend tax was abolished. This was one of the main reasons to abolish the tax. When Unilever announced that they weren’t so sure about moving their headquarters to the Netherlands anymore, the house of representatives took another look at the abolition  of the tax.  This time, they came to the conclusion that the abolition did not yield enough economic benefits that outweighed the possible costs of the abolition.

The government would have lost 1.9 billion euros if they had abolished the dividend tax.  The positive effect would have been minimal, because only a handful of foreign companies were to move business to the Netherlands if they abolished the dividend tax. The decisions these companies make are not based solely on whether or not the tax will be abolished but more on whether or not the performance of the business in the Netherlands will improve.

Now that the government has 1.9 billion euros to spend, the question is where they are going to spend the money. The prime minister has announced that the money will be spent on improvement in the business climate in the Netherlands to increase the number of international companies that have branches in the Netherlands. The money will also be used to improve the dutch business in general. 

One of the measures to improve the business climate is to lower the taxes that companies have to pay. The corporation tax for larger companies will decrease from 22.5% to 20.5%. For medium-sized and smaller companies, the corporation tax will decrease from 16% to 15%.  Companies that now benefit from the scheme  whereby 30% of the salary of people who come from another culture to work for your company can be paid without taxation can benefit from this for another 2 years. The cost of this scheme for the Netherlands is 900 million to 1 billion euros  a year. This would mean that within 2 years the 1.9 billion euros saved by not abolishing the dividend tax will be spent.

The decision to spent all the money on improving the investing and business climate instead on for example the health care or education was based on the fact, that the money goes where it comes from. The money that it would have costed to abolish the dividend tax would have benefited the business sector as well. Therefore the decision to put all the money gained back into the improvement of the business sector was the logical thing to do, according to the prime minister Mark Rutte.

The dutch economy has already grown for 6 consecutive years. The past year the growth was 2,8 percent and was set on 2.6 percent for the coming year. This economic windfall was not included in this percentage. Therefore, the growth will probably be bigger next year.


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