Dutch dividend tax abolition plan draws protests

THE HAGUE: Of all the giveaways expected in Dutch Prime Minister Mark Rutte’s 2019 budget, nothing rankles many of his compatriots more than a plan to abolish the dividend tax.

Rutte, Finance Minister Wopke Hoekstra and other government ministers will unveil the budget in The Hague after a speech by King WillemAlexander on the state of the nation and cabinet plans for the coming year.

While the proceedings will keep to tradition with the king and other members of the royal family dressed in finery riding chariots, market pros will be looking beyond the pomp and show to see what the budget has to say about the dividend tax, which has become the most controversial item in the first year of Rutte’s third government.

With a booming economy – the Dutch Bureau for Economic Policy Analysis CPB estimates GDP will increase 2.5% in 2019 – Rutte has said recently that “people will feel in their wallets that the Netherlands is doing better. We will lower taxes and invest in health care, education, infrastructure.”

Yet worries are emerging in some quarters that the government’s capacity to do that may be constrained by a hole in the budget from the possible elimination of the dividend tax.

Opposition parties claim Rutte is helping international companies more than the country’s people. While scrapping the dividend withholding tax is meant to keep the Netherlands attractive, killing it means hundreds of millions can’t be spent on locals, they say.

“Abolishing dividend tax means replenishing foreign treasuries with money that could be better spent in the Netherlands, in good healthcare, affordable housing, more teachers and safe streets,” three left-wing opposition parties said in a motion in the lower house of parliament this summer.

Rutte’s government last year estimated abolishing the tax will cost €

1.4bil (US$1.6bil) a year. On Sept. 15, NRC Handelsblad, citing a copy of the € budget it has seen, put it at 1.9bil as the growing economy pushes up corporate earnings, further fuelling the opposition’s outrage about scrapping the tax.

Support for abolishing the dividend tax fell to 15%, a survey last month by pollster Maurice de Hond showed, from 24% in November.

The 51-year-old premier has expressed some misgivings, recently labelling the proposal “bizarre” and “very annoying”. He maintains, however, that the measure is absolutely necessary for the Dutch economy.

The Dutch dividend tax legislation was introduced in 1966 with a levy of 25%. In 2007, the rate was lowered to 15%. — Bloomberg