Netherlands To Cut Corporate Tax In 2007

by Ulrika Lomas, Tax-News.com, Brussels

21 September 2006

The Dutch government has pledged to share the fruits of its anticipated budget surplus next year through further cuts in tax for individuals and businesses.

Presenting the last budget prior to the election on November 22, Holland's long-serving Finance Minister Gerrit Zalm stated that the government will continue to cut the rate of corporate income tax, which will fall to 25.5% in 2007 from 29.1%, putting it below the European Union average. This represents a 5% cut in corporate tax since 2005.

In addition, small and mid-sized companies whose profits are liable to income tax will receive an exemption of 10%.

There will also be a small income tax cut for individuals, with the lowest tax bracket reduced by 0.50% and the second bracket by 0.05%. Unemployment insurance contributions, which are paid by all working persons, will also be cut by 1.35%.

The government is also taking steps to reduce unnecessary business regulation, and in 2007 it will take further measures to root out "superfluous or unnecessarily complicated legislation".

The number of licences will be reduced by one million, and during 2007 the government expects to achieve its target of cutting the administrative burden by 25%.

The Dutch government has said that tax cuts are possible because it expects a budget surplus equal to 0.2% of gross domestic product next year, and because it is contributing EUR1 billion less to the European Union's coffers in 2007.

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