Larger research also shows that the richest pay relatively less tax

This article was last updated on May 22, 2024

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Larger research also shows that the richest pay relatively less tax

Being rich is structurally rewarded in the Netherlands. The approximately 140,000 richest residents, approximately 1 percent of all workers in the country, pay relatively less tax than others. This is evident from a new study by the Central Planning Bureau (CPB).

Two years ago the CPB also concluded that the strongest shoulders do not carry the heaviest burdens. This involved a study into incomes and taxes from 2016. To ensure that this one year was not a fluke, the CPB, at the request of several ministries, looked at whether the very richest also benefited from taxes over a longer period.

And that is true. From research into the situation from 2011 to 2019, the CPB sees that on average slightly more tax is paid than in 2016, but that the tax burden for the group with the largest wallet remains the lowest.

Profits

This is mainly because the very richest obtain their income from the profits of the companies of which they are directors and major shareholders. And although that profit may be higher or lower in one year, it appears that the small group of high earners pays relatively much less tax and social security contributions over a longer period.

What plays a role in this is that the economy flourished considerably in the previous decade. From 2015 onwards, corporate profits only increased, and with them the profit distributions to the owners.

In the economic growth between 2011 and 2019, the CPB sees that of all workers, the highest income groups benefit by far the most. While the real incomes of 99 percent of workers increased by 4 to 8 percent, those of the richest 1 percent increased by more than 70 percent.

1400 very rich

The very richest (0.01 percent, about 1,400 people) paid about 28 percent in taxes, the Central Planning Bureau calculated. For workers with an average salary, taxes consume almost 40 percent of the salary.

The richest mainly have income from a business. Corporate tax is paid on the profit. Dividend tax is only paid if they pay them out, but in practice many rich people leave their profits in the company.

The fact that the profit remains there is not necessarily a bad thing, says CPB researcher Arjan Lejour. “The money can be used as a buffer or investments. But there is also a part that invests the part of the profit that is not needed. Privately you pay tax on this in box 3. But a company does not have to do this.”

Measures

Wealthy entrepreneurs can choose to retain profits in their company for longer and then transfer a large amount in one go for relatively less tax payment. To combat the imbalance, a number of measures have already been introduced in recent years.

Since this year, more tax has to be paid on profit distributions. The CPB proposes to levy a larger share of profit taxes directly, to prevent owners from hoarding profits in their companies. “But this could have consequences for the business climate in the Netherlands,” says Lejour.