“Dividend Tax 3.0.” “Ball-ball with billions.” The opposition did not have to think long about how to describe the Job-related Investment Discount (BIK). The cabinet and coalition are convinced that this is the way to boost employment and keep the much-needed investments up to standard. What exactly does the latest corporate tax credit of 2 billion euros entail?
“Dividend Tax 3.0.” “Ball-ball with billions.” The opposition did not have to think long about how to describe the Job-related Investment Discount (BIK). The cabinet and coalition are convinced that this is the way to boost employment and keep the much-needed investments up to standard. What exactly does the latest corporate tax credit of 2 billion euros entail?
The BIK works as follows: companies that invest may deduct part of this from their wage tax. Labor therefore becomes cheaper.
“There is an enormous risk that investments will decline because of the economic crisis that we now have”, Prime Minister Mark Rutte warned during the General Political Discussions two weeks ago.
That is why something has been devised for companies so that those investments remain up to standard next year. Because, Rutte argued, more investments lead to more jobs and more economic growth.
This week, the House of Representatives will continue to debate with the Ministers of Finance about the budget plans for next year. The investment allowance will undoubtedly be discussed.
CPB: Investments will drop by 9 percent this year
Calculations by the Central Planning Bureau (CPB) indeed show that business investments, worth about 100 billion euros annually, are showing a significant dip this year. This year is assumed to be nearly 9 percent less than in 2019, and investments will pick up again next year.
According to the opposition, the cabinet has “no idea” what the effects will be of the discount measure. The parties, led by GroenLinks, SP and PvdA, would rather use the 2 billion to build more homes or increase salaries in healthcare.
Opposition: ‘Different name, same idea’
With a tax discount of 2 billion euros for companies, thoughts quickly go back to the beginning of this government period when the cabinet wanted to abolish dividend tax. This led to so much resistance from within and outside politics that the cabinet declined.
The amount would then still go to the companies in the form of a reduction in the profit tax for large companies, but that plan also fell through. First there was a delay due to inadequate pay rise while corporate profits slosh against the baseboards, then came a delay due to the corona crisis.
“Different name, same idea: the investment discount for companies is actually dividend tax 3.0,” said SP leader Lilian Marijnissen. Jesse Klaver (GroenLinks) spoke about a “farewell gift for Hans de Boer”, referring to the now former chairman of the employers’ club VNO-NCW. “Nothing more, nothing less.”
Little support from opposition
The plan to abolish dividend tax came from the VVD. Coalition partners CDA, D66 and ChristenUnie gradually pulled their hands off it. Again, the liberals are referred to as to who came up with the idea of the investment rebate, but the junior government partners continue to support the plan.
The coalition has little support in the opposition, as appeared two weeks ago when GroenLinks called for the 2 billion euros of the BIK to be spent differently. Only SGP, FVD, Henk Krol (former 50PLUS) and Wybren van Haga (former VVD) consider the tax rebate to be justified. Not enough for a majority in the Senate.
In any case, VVD wants a billion dollar discount for companies
This cabinet believes it is important that employers’ costs do not increase too much. If you only look at this term of office, companies will be faced with an increase in the burden of more than 5 billion euros at the end of the process. Without the BIK, that would be 7 billion euros. Citizens can count on a tax reduction of around 5 billion euros.
VVD party chairman Klaas Dijkhoff wants to prevent a fiasco such as with the dividend tax. He made it clear that the 2 billion euros will go to the left or right to the business community. “If the BIK does not please the colleagues, we will simply lower the profit tax.”
