News Articles: Tax Expenditures in the Netherlands

By Laurens Berentsen | 14 and 19 September 2021

Laurens Berentsen wrote two articles in the dutch FD Nieuws on the high levels of tax expenditures in the Netherlands using data from the GTED.

In the Netherlands, the revenue forgone through tax expenditures, i.e. deviations from the standard tax law or benchmark including exceptions, deductions and credits amounted to more than €100 billion over the past six years, on average. This accounts for 14% of GDP and 64% of total tax revenue. For the European Union and OECD member countries, the average share of tax expenditure amounts to roughly 5% of GDP.

The largest tax expenditure provisions in the Netherlands is the general tax credit, which accounted for €23.8 billion in revenue loss last year. The revenue forgone due to pension-related tax benefits and the labour tax credit together amounted to more than €42 billion, and the mortgage interest deduction cost an additional €9.5 billion.

The Netherlands is one of the few countries that periodically evaluates tax expenditures. Yet, the results of these evaluations are not binding, and hence tax expenditure provisions that have been proven to be ineffective can remain in place.

You can read more in Berentsen’s article here.

Besides their fiscal cost, tax expenditures can significantly add complexity to tax systems. In addition, they can trigger undesired side effects such as the regressive impact of the mortgage interest deduction and other tax breaks for homeownership.

Berentsen’s second article looks at those side effects here.