More city taxes need not burden residents: policy brief

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Local authorities levying more taxes need not create a financial burden on residents, says a policy brief published on Thursday by the Dutch Central Planning Bureau (CPB). They also argue that a more localized approach to taxation may create 15,000 additional jobs over time.

Giving municipalities a greater taxation autonomy could be a good solution for local democracy, writes NRC in an article about the policy brief.

The CPB argues that such reallocation is feasible. The core idea behind the new approach is that overall tax burned should not increase. A rise in the level of local taxation should be met by offsetting fiscal decisions on the national level.

Currently, a large share of taxes is collected and redistributed nationally. The government uses sophisticated mechanisms to process and redistribute the incoming tax revenue.

Redesigning the approach to have two types of local taxes is currently under consideration. The first is the residential tax (ingezetenenbelasting), which is levied on the basis of residence and is equal for everyone in a municipality.

The second is the property tax (ingezetenenbelasting) levied on the basis of property value. The owners of more expensive houses are thus subject to higher local taxes. The idea behind this option is that property value accounts for allocation of available infrastructure. Owners of more expensive houses would be compensated through more accessible infrastructure.