Dutch Budget Offers Token Corporate Tax Reduction

by Ulrika Lomas, Tax-News.com, Brussels

19 September 2001

Announcing a small cut in the Netherlands headline corporation tax rate yesterday from 35% to 34.5% as part of next year's budget, Annemarie Jorritsma, economics minister, described it as a "first step that should lead to further reductions in future years".

Although Dutch corporate tax rates are higher than the EU average, the very favourable taxation regime for international holding companies, including an unusually generous participation exemption, mean that local corporation tax rates are really only a problem for domestic companies.

This was a pre-election budget, and included some spending increases; nonetheless the country will run a budget surplus of 1% of GDP as measured under the EU's Maastricht criteria, and government debt will continue to fall, ending the year at less than 50% of GDP (Maastricht stipulates a maximum 60%).

The budget is predicated on a drop in growth from 4% last year to 2% both this year and next, which represents a drop from previous expectations. Finance Minister Gerrit Zalm said he saw no need to revise those projections further downward as a result of last week's events.

The budget was outlined during Queen Beatrix's speech from the throne during the state opening of Parliament, and Opposition leader Jaap de Hoop Scheffer called it "too much a speech of business as usual". The Council of State, an advisory body, said the budget was risky, in the face of economic uncertainty.

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