Mega headache for coalition and cabinet: budget change costs billions

The formation seems to have been around for a while. Politicians are looking behind closed doors for a solution to the billions of euros that have to be allocated to the budget due to high inflation and the war in Ukraine. It’s a big puzzle.

On Tuesday evening, the coalition and the cabinet met the Ministry of Finance for the first time for consultation. This meeting will continue tonight.

The party leaders of the VVD, D66, CDA and ChristenUnie, the three state secretaries and the prime minister must agree on additional expenditure.

The world looks very different from when the government plans were written, because of the war in Ukraine, which contributed to the huge rise in inflation. All these changes must be recorded in the so-called spring memorandum.

It is expected that the coalition and the cabinet will need this and next week to find a solution together. A few opposition parties follow the round without a majority in the Senate.

The spring memorandum must ultimately be submitted to the House of Representatives before 1 June.

Savings tax causes headaches

First, rising energy prices are causing billions of dollars in purchasing power repair packages. This spring, the government has earmarked just under 3 billion euros for this. It is striking that this is partly financed by the high Dutch gas revenues.

Political leaders won’t care as this bill is quite “veiled”. This becomes especially complicated when filling in ‘box 3’, also known as savings tax.

Savers and investors were taxed by the tax authorities on a fictitious profit basis, but that is no longer allowed, the Supreme Court ruled at the end of last year. The assumed profit calculated by the tax authorities was very high, especially for savers. The savings have evaporated.

Possible price tag of 7 billion euros

Since then, politicians have struggled with possible solutions. These are primarily purely financial. The judge ruled that savers who paid very high premiums for 2017 and 2018 were entitled to compensation.

There is still a lot of uncertainty about the amount of this bill. Will the 60,000 taxpayers who are simply against it be compensated? Or is it the 1.3 million people who pay this tax?

The company is working on several variants. A government source confirmed a government source after previous government reports, one of which costs about $7 billion ILLUMINATED† It is by no means certain which reimbursement option will be chosen and how many people are eligible.

Where the money comes from is another politically sensitive issue. The question is whether coalition parties are prepared to tax wealth more heavily. D66 and ChristenUnie think it’s a great idea, but the VVD doesn’t want to do it now.

At the same time, D66 and ChristenUnie are arguing for more tax on box 2 major shareholder directors. taxes).

Cabinet plans AOW and youth aid get stuck in the Senate

Public pension and youth benefit schemes will probably also need to be reviewed. It also costs money.

Opposition parties are calling for a higher pension for the elderly and planned cuts in youth benefits should be scrapped. Discussions on this have already been held at the beginning of this year.

Initially, the cabinet did not want to bow to it, but the coalition does not have a majority in the Senate. It is therefore not surprising that these cabinet proposals were rejected. The government and the coalition will have to do something about this.

More defense money for NATO standard

Then there is the request for extra money for Defense. The pressure to heed this call has steadily increased since the war in Ukraine. The Netherlands has been failing to meet the NATO standard of 2% of gross domestic product (GDP) for years.

Not even with the already promised additional investments of 3 billion euros. The company hopes this will translate to 1.85 percent.

Prime Minister Mark Rutte was still optimistic about this at the beginning of February, when most setbacks of billions were already taking shape. “What’s the big picture? What is the problem we need to solve? Then we have to analyze it properly, take it apart and solve it. That’s controlling.”

Source: NU