The Most Unequal Country: Part 2

What Rutte III did not do, and Rutte IV will not do

While the dilapidation of the finished Netherlands started many years ago according to Sylvia Ephimenco, this article jumps forward to Rutte’s third cabinet.

After four years of a coalition of PvdA and VVD, it was time for Rutte III. PvdA experienced a historic loss during the 2017 elections, going from 38 to 9 seats, therefore marking the end of Rutte II. For VVD’s and Rutte’s survival, a new coalition had to be formed. This resulted in a coalition consisting of VVD, D66, CDA and CU, which took office in 2017. It was the same year in which the Netherlands was ranked the most wealth unequal country in the world. 

The first interesting policy change by Rutte III was the sudden introduction of the abolition of dividend tax – this is simply a tax over the dividend that Dutch companies distribute among their shareholders. This policy suddenly appeared in Rutte III’s coalition agreement, despite not being in its parties’ programs. Now, there are two problems with this. Firstly, the introduction of this plan itself. Though memos of the Ministry of Finance advising against the abolition of the dividend tax were later proven to have been provided, Rutte continuously denied knowing of their existence.  Secondly, support for abolitioning the dividend tax shows once again that Dutch politics is all about the rich. Instead of focusing on measures targeting wealth inequality, Rutte’s first order of business was supporting large corporations and their shareholders. 

Facing hard resistance from both coalition partners and the opposition, barely surviving a motion of censure, Rutte had to compromise. The abolition of dividend tax was cancelled. In turn, corporate profit tax was lowered. Though not as impactful, this still significantly decreases the amount of taxes that wealthy Dutch companies ought to pay.

The second notable policy change by Rutte also concerned taxes. Ever since its abolition in 2001, there has not been a direct wealth tax in the Netherlands, apart from tax on returns on investment. Knowing that the Netherlands was ranked the world’s most wealth unequal country in 2017, the government could have re-introduced a wealth tax and decreased income taxes. This way, working would have been encouraged and the wealth gap would have been able to shrink. Rutte III, however, instead decided to increase the tax-free amount in the capital tax box 3 from 25,000 euros to 30,000 euros per person. This is ironic, given that, according to the Dutch Central Statistics Bureau, an average Dutch household owns 28,000 euros in capital. The wealth-expanding effect of this policy change is thus minimal. 

The actions of the past unfortunately foreshadow the future. Looking at the plans of Rutte IV, ambitious plans to target wealth inequality are still missing. Policies only include increasing the transfer tax for second homes by one percent. To really combat wealth inequality, radical changes should be made to the Dutch tax system. While owning wealth has been continuously rewarded by Rutte II and III, the hard work of the average Dutch worker has been continuously undermined by the lack of any policy to tackle the rampant wealth inequality.

Stay tuned for part 3: in which I will take a look at the Dutch education system and its effect on wealth inequality.

by Joost Kamp




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Images from Unsplash

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