Economy

Ministry of Finance: ‘Tax on labor too high’

That is one of the conclusions from the official report ‘Building blocks for a better tax system’ by the Ministry of Finance in collaboration with other departments.

“Substantial tax relief on labor is needed to counterbalance the rising health insurance premiums,” says one of the so-called policy options. These are intended for political parties to draw up their election programs for next year’s elections.

Meat tax

On the other hand, according to the researchers, wealth should be taxed higher, for example by limiting the mortgage interest deduction or by a higher gift and inheritance tax.

Other policy options mentioned are a higher air passenger tax, the further increase of tobacco and alcohol excise duties and new taxes on meat or soft drinks.

Difficult to do

The ministry concludes that the current tax system is outdated and is also becoming increasingly difficult to implement for the tax authorities, which are struggling with staff shortages and outdated ict.

That is why several studies were launched last year to combat bottlenecks in the current tax system. Examples of these bottlenecks are the increasing tax burden on workers, the complicated allowance system, the non-taxation of climate damage and ‘tax arbitrage’, in which people shift money so that they have to pay less tax.

Surcharges on the shovel

At the end of last month it became clear that the allowance system will be completely overhauled. The cabinet is working on a new system behind the scenes.

This is separate from measures that are needed in the short term to prevent ‘distressing cases’, such as citizens who cannot repay benefits paid and thus get into further financial difficulties.

The allowance system is also discussed in this new report. Although it is clear that there are several alternatives – such as a ‘basic needs allowance’ or the integration of all allowances into the income tax – they all seem far away.

“None of the alternatives are bite-sized and can be implemented quickly,” the report said. Moreover, according to the researchers, the risk remains that such an alternative ‘expands in the same way as has happened with the current allowance system, with a similar problem’.

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