Some 5.4 million Dutch workers to pay less tax under new system

The Rutte III government's plans for a new tax system, will result in 5.4 million workers in the Netherlands paying less income tax, and 2.1 million workers paying more income tax, Statistics Netherlands reported on Monday after questions from various media sources.

The current tax system consists of four tax brackets with different income tax rates. Tax bracket one consists of the people with the lowest income, and tax bracket four those with the highest income. The new government wants to change this system to only include two tax brackets, one for high incomes and one for everyone else. Under the new tax system, the around 570 thousand workers in the current fourth bracket, and the around 4.8 million workers in the second and third bracket will pay somewhat less income tax. The 2.1 million workers in the current first bracket, will pay somewhat more income tax. 

Statistics Netherlands based its calculations on figures from 2016 and worked under the assumption that the people in the tax various tax brackets in 2016, still find themselves in the same brackets. The plans revealed in the government agreement last week, only make clear what will happen to people with paid work. 

In 2016 the Netherlands counted a total of 13.1 million citizens with taxable income from work and home. Of them, 6.1 million people fell into the first tax bracket. In this group 2.1 million people had paid work. Their income tax will increase from 36.55 percent to 36.93 percent. The rest of this group consists of 4 million not-working people and 1.8 million pensioners. Under the current system, they are paying 18.65 percent tax. The government agreement did not reveal how their income tax will be affected by the new system.

Nearly 6.3 million people fell into the second and third bracket of the current income tax system. Of them, 4.8 million worked and 1.2 million were retired. The 4.8 million workers in this group, will also pay an income tax rate of 36.93 percent under the new system, compared to 40.40 percent under the current system. 

The fourth tax bracket included a total of 660 thousand people, including 570 thousand workers. In the current income tax system, people in the fourth and highest tax bracket earn 66,421 euros or more, according to the stats office. In the new system, the income for the second and highest tax bracket will be 68,600 euros and above. In the new system, people in the highest bracket will pay 49.50 percent tax, compared to 52 percent in the current system. 

People of retirement age willl no longer pay retirement rates in the new system. For this group there will be three tax brackets. The details of these brackets are not known yet, according to the stats office.