The Netherlands will probably have to do more to reduce tax breaks on mortgages and for freelancers in order to qualify for EU recovery funding, according to finance minister Wopke Hoekstra.
Although both tax breaks have been trimmed, ‘informal contacts’ have said Brussels is still not satisfied, and is ‘likely to look critically at reforms which deal with the challenges facing the Dutch labour and housing markets,’ Hoekstra told MPs in a briefing.
The Netherlands is far more generous than the rest of the EU in terms of mortgage interest deductions, and this has been criticised in Brussels as an unfair tax advantage for years. The deduction is being gradually reduced to cover just the first tax bracket.
The tax free allowance for freelancers, currently just over €7,000 and also being reduced, is also still too high and distorting the market, Brussels has indicated.
The Netherlands must now take action on both tax breaks in order to qualify for almost €6bn in funding from the EU because a further reduction in both are ‘likely to be needed to get a positive result,’ Hoekstra said in a briefing to MPs.
Both measures are highly politically sensitive and will probably play a role in the ongoing coalition negotiations.
EU countries can only claim recovery money if they commit to economic reforms – a condition which the Netherlands fought for when the funds were being set up.
The Netherlands plans to use the EU funds to develop hydrogen as a power source, build a new nuclear reactor to make medical isotopes, and possibly improve the insulation level of government buildings. Measures to stimulate life long learning are also on the wish list.
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