The newly sworn-in Dutch Cabinet plans to compensate victims of the child care allowance scandal and to pursue new environmental taxes to combat climate change.
King Willem-Alexander on January 10 swore in the new Cabinet members, who came from Prime Minister Mark Rutte’s conservative People’s Party for Freedom and Democracy, the centrist Democrats 66, the centrist Christian Union, and the center-right Christian Democratic Appeal.
The swearing in came almost a year after the Dutch government under Rutte’s leadership resigned in response to its mismanagement of child care tax credits that led to wrongful investigations and the financial ruin of thousands of low-income families — a move that legal scholars said was largely symbolic. Several members of the previous Cabinet have been reassigned to different posts within the new Cabinet.
Former Finance Minister Wopke Hoekstra, who presided over the agency during the child care allowance scandal, was appointed deputy prime minister and director of the Ministry of Foreign Affairs, according to a January 10 Ministry of Finance release. Alexandra van Huffelen and Hans Vijlbrief, former state secretaries of finance, were appointed state secretary for the interior and kingdom relations and state secretary for economic affairs and climate, respectively.
The Netherlands also appointed its first female finance minister, Democrats 66 party leader Sigrid Kaag, in a Cabinet made up of nearly half women. Only five other EU member states have female finance ministers — Estonia, Finland, Lithuania, Luxembourg, and Spain. Kaag served as minister of foreign affairs and minister for foreign trade and development cooperation in the previous Cabinet.
After the MOF requested an investigation in May 2020, several reports found that the Dutch tax office illegally discriminated against applicants for child care allowance with dual nationality by singling them out for investigation, which caused the government to falsely accuse hundreds of dual-nationality parents of fraud and revoke their child care allowance. A parliamentary committee charged with investigating the scandal blamed the entire Dutch system of government for failing to change legislation and enforcing unfair provisions outside the scope of mandatory law. The tax authority canceled the debt of falsely accused parents and paid each family €30,000.
The new Cabinet has committed to giving victims of the scandal “generous compensation” and facilitating healing, according to a December 15, 2021, coalition agreement laying out the government’s priorities. With plans to run the recovery and compensation operation until 2023, the Cabinet also wants to eventually abolish government allowances to cut down on complex arrangements. The government will review the child care allowance system and increase the reimbursement of child care up to 95 percent for working parents, the agreement says. To decrease confusion, the government will pay the allowance directly to child care institutions, with parents paying a small personal contribution, it says.
The government's plans also include more environmental taxation to combat the effects of climate change. The Netherlands plans to increase the marginal tax on top of the carbon price in the EU emissions trading system, ideally in consultation with its neighboring member states. Financial returns from the proposed levy and an increased carbon floor price would go into the climate fund to make companies more sustainable, the agreement says.
The government also wants to introduce a pay-to-use system for cars in 2030, when it aims for all new cars to be emissions-free, so that electric cars and those powered by fossil fuels will contribute to road use. The system would be based on the proposed motor vehicle tax with a rate charged on distance driven annually. It also plans to increase the airline ticket tax, whose proceeds would be partially used to mitigate the environmental impacts of aviation.
In light of ongoing challenges from the coronavirus pandemic, the new government has set aside €300 million annually for tax relief for small and medium-size businesses to continue paying salaries in the event of illness, according to the agreement. Further, the government aims to simplify the tax system in conjunction with its work to abolish allowances. Also, self-employed people will benefit from an increased tax credit for entrepreneurs.
Taxes on sugary drinks, alcohol, and tobacco will go up, according to the agreement. The government is also reviewing how to introduce a sugar tax and implement a zero-rate VAT on fruits and vegetables to encourage healthy eating habits.
Correction, January 11, 2022: An earlier version of this story said that only four other EU member states have female finance ministers, but it overlooked Luxembourg, which on January 5 made Yuriko Backes its first female finance minister. The story has been updated. Tax Analysts regrets the error.