Cabinet agrees to cut tax, boost spending

8th April 2005, Comments 0 comments

8 April 2005, AMSTERDAM — The Cabinet reached agreement over the 2006 Budget on Friday paving the way for additional spending and tax cuts as the nation starts to recover from an economic slump.

8 April 2005

AMSTERDAM — The Cabinet reached agreement over the 2006 Budget on Friday paving the way for additional spending and tax cuts as the nation starts to recover from an economic slump.

The full cabinet approved a deal reached by several ministers on Thursday, allocating an extra EUR 1.2 billion in spending for education, public safety and a workplace accord for public servants.

Plus, tax cuts of EUR 1.1 billion will also be included in next year's budget, news service '' reported. Part of that will be used to scrap part of the real estate tax, known as OZB.

The extra spending and tax cuts come after the Dutch economy pulled itself out of a nine-month recession in 2003. The sluggish recovery will yield 1 percent in economic growth this year, forecast to accelerate to 2.25 percent next year.

Finance Minister Gerrit Zalm said after the weekly cabinet meeting that in the 11 years he has served as the nation's finance boss, he has never seen the budget agreed on so early. The full text of the budget will be presented to the nation in September.

The budgetary agreement stipulates that no one will pay more than 5 percent of their income for the ziekenfonds public health insurance cover next year. 

People with a low income will be particularly spared health insurance costs and will pay a maximum of 3.5 percent. However, those with higher incomes will benefit the most, 'RTL News' reported.
The government is introducing a new health insurance system next year in which everyone will pay the same premium of EUR 1,100 per year.

However, low-income earners will receive money back via a bonus scheme. If EUR 1,100 represents more than 5 percent of someone's income, they will be repaid money from the government. The bonus can amount up to EUR 500 per year.

The decision to set a maximum to what families or individuals will pay for health insurance will cost the government an extra EUR 612 million. In total, the bonuses will amount to EUR 2.9 billion. 

Figures from the Social Affairs Ministry indicate the new health insurance scheme will boost purchasing power. OZB tax cuts will also boost purchasing power.

Minimum-income families will gain 1.4 percent in purchasing power next year, while those who earn double the average income and have two children will have an extra 5.6 percent to spend. The cabinet has not guaranteed increases in purchasing power.

Meanwhile, the additional funding will be allocated next year to building new jail cells, more secure psychiatric units, youth care and other public safety measures. Funding has also been put aside for a new CAO workplace agreement for public servants, newspaper 'Trouw' reported.

Social Affairs Minister Aart Jan de Geus, Laurens Jan Brinkhorst at the Economic Affairs Ministry, Minister Zalm and Prime Minister Jan Peter Balkenende also agreed to examine in coming months whether the amount employers can contribute to childcare costs is too low.

If it is proven to be low and that too few women are entering the workforce, the cabinet will look for budgetary leeway to increase the government contribution to stimulate mothers to return to work.

The government will also assess the possibility of abolishing school fees for 16 and 17 year olds. A decision on that is not expected until August.

Additional spending of EUR 750 million on education and knowledge was already agreed on in the new coalition accord signed over the Easter weekend. That funding will be found in budgetary adjustments.

Some ministries spent less than what they had budgeted for. The Education Ministry, for example, spent EUR 130 million less than budgeted.

About EUR 600 million has also been earned due to lower interest costs on public debt. The budget deficit will fall to 2.3 percent of national income this year and 2.1 percent next year.

Other windfalls have come from better than expected gas earnings and reduced European Union contributions.

[Copyright Expatica News 2005]

Subject: Dutch news

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