Cabinet earmarks €500m for income tax cuts in next month’s budget

The government plans to cut the lowest income tax band as part of a €500m package of measures to boost jobs, the NRC said on Friday afternoon.

The NRC says the measure has the approval of the three opposition parties who work with the government and will be announced as part of the budget presentation on September 16.

The tax cut is in addition to minor cuts in the higher tax bands agreed last year.

The paper says one source has informed it the income tax rate in the lowest tax band – up to €19,645 – will be cut by 0.3 percentage point to just under 36%. Income tax in the second tax band – up to €56,631 – is currently 42% and above that 52%.

In addition, ministers plan to boost spending on development aid by €375m. The money will go for emergency help and to support refugees in their region of origin. An extra €50m will also go to the defence ministry.

Negotiations

The paper says the ruling coalition – the right-wing Liberal VVD and the Labour party (PvdA) – will complete their negotiations on the 2015 spending plans with the opposition parties next week. The cabinet needs opposition backing to ensure its plans have majority support in the upper house of parliament.

The government has extra money for tax cuts because of the improvement in the economy. In particular, fewer people are claiming unemployment benefit than expected and spending on healthcare has also generated windfalls, the NRC said.

The draft budget will be sent to the Council of State at the beginning of September.

MPs will also be given the documents four days ahead of their formal publication. For the past four years, the documents have been kept secret up to the presentation because of leaks.

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