The wealthiest Netherlands residents don’t pay the most taxes. Middle-income and high-income households both contribute about 40 percent of their income to taxes. But the 1 percent highest earners only spend 21 percent of their income on taxes – less than the lowest earners, NRC reports based on a new study by central planning office CPB.
“The fact that top incomes pay a lot less tax is a new outcome,” CPB tax economist Arjan Lejour said to the newspaper. “The prevailing view – that high incomes pay more tax – is not reflected in this study.” For the study, the CPB included all taxes. Income tax is higher for those who earn more, but other taxes have the opposite effect, the researchers found. The CPB researchers looked at 2016 figures, the most recent complete and detailed data set.
Social contributions, like for unemployment and disability schemes, have an upper limit. People with higher salaries don’t pay contributions above that upper limit. So the higher your wage is above that limit, the lower your relative social contributions burden. The tax on consumption – VAT and excise duties – also hit low incomes harder. They spend a larger part of their income on these. High incomes have more left over to save.
The fact that the 1 percent richest Dutch pay relatively little tax also has to do with them often having interests in companies. Tax on corporate profits is significantly lower than that on wages. “We allocated these profits to households on the basis of financial interests,” Lejour explained to the newspaper. “As a result, the tax burden for this group decreased. We visualized that for the first time.”
When it comes to government expenditure, the CPB did notice some redistribution of wealth from rich to poor. The lowest incomes benefit significantly from social assistance benefits and allowances. Without this type of government spending, half of the lowest incomes would receive about 19 percent of the national income, the CPB calculated. The government increased that to 29 percent. The 10 percent highest earners get about a quarter of the national income. Without the government’s efforts, that would be a third.