Package including SME profit tax cut and 20 billion euro investment fund to contribute to 3,5% GDP growth in 2021.
On Budget Day (known as ‘Prinsjesdag’), the third Tuesday of September, the Dutch government announces its plans and ambitions for the coming year. This year, due to the ongoing COVID-19 pandemic, King Willem-Alexander did not travel to the Hall of Knights in the Glass Coach to read his Speech. Instead, he has delivered his speech from the Grand Church in The Hague (and travelled by car).
Later today the Minister of Finance (Wopke Hoekstra) presents the government budget for the upcoming year, which will be followed by a cycle of parliamentary debates, lasting until the beginning of December. These debates are expected to be very political and heated – due to the upcoming national elections (17 March 2021).
Key message from this years’ King’s Speech is that the Cabinet will allocate significant budget to stimulate the economy. In addition, the King warns that the country should be prepared for a significant economic crisis following the COVID-19 pandemic. But there will be no cuts next year, because that would only make the crisis worse. And due to the austerity policies of recent years and the strong foundations of the Dutch economy, there are “sufficient buffers” to absorb the impact of the crisis.
Earlier, the Ministers of Finance and Economic Affairs presented an investment fund of €20bln to strengthen the Dutch economy. This fund will be managed by the Minister of Finance, and the Minister of Economic Affairs will lead a committee to assess proposals and requests for this fund.
Key elements of the King’s Speech & Government budget 2021:
- The economy is expected to grow by 3.5 percent next year, after a decline of 5 percent this year due to the COVID-19 crisis.
- National debt will increase to 62 percent of GDP.
- Purchasing power is expected to increase by 0.8 percent. Working people in particular will be able to buy a bit more: their purchasing power will increase by 1.2 percent.
- Unemployment is expected to reach 5.9 percent next year (from 3.6 percent per May 2020).
- The previously promised reduction in profit tax for large companies is cancelled. In addition, tax evasion will be tackled more vigorously.
- SME profit tax is to be lowered. This reduction in the corporate income tax rate had already been announced earlier and is now turning out somewhat differently than expected. The threshold between the high (25 percent) and the low rate (16.5 percent) will be €400.000,- of profit (currently: €200.000,-).
- There will be a tax deduction to stimulate investment. Under this so-called ‘Job-related Investment Discount’ costs for investments can be deducted from payroll tax.
- The self-employed tax deduction will be reduced faster. However, this will be at the expense of freelancers, who will see their self-employed tax deduction decrease by a further almost €2.000,- in the long run. In exchange, the labor discount will be increased by a total of €500mln, from which all workers will benefit. In addition, the rate in the first income tax bracket will decrease by approximately 0.2 percentage points (at a cost of €500mln). Because self-employed persons benefit from both measures, they will not lose out, while salaried employees will gain a bit.
- A second ‘corona bonus’ for healthcare personnel will be granted (€500,-) and an additional €100mln from the healthcare budget will be spent on reducing the work and regulatory burden.
- The 2 percent tax over the purchase price of their property for first time buyers will be terminated.
- A CO2-tax for industry will be implemented – regarding which more details will be communicated later today.
The full King’s speech (in English) can be viewed via this link.