The 2023 Dutch budget's impact on your wallet, and highlights from the Cabinet's plan
The fourth Cabinet of Prime Minister Mark Rutte introduced its proposed budget for 2023 on Tuesday. It includes 17.2 billion euros to help boost purchasing power by nearly 4 percent, part of a 395 billion euro total budget. An overview of the key points follows this introduction, specifically those budget items related to income, taxation, energy costs, healthcare, the asylum system, the criminal justice system, infrastructure, agriculture, and the Caribbean Netherlands.
The Cabinet will have to defend its budget in the Tweede Kamer and the Eerste Kamer, the two Houses of Parliament. The political debates will take place this week, and are considered among the most important every year.
Still, revenue is expected to equal 366.4 billion euros far below spending levels. The spending deficit was calculated before the Cabinet unveiled its plans for an energy price cap and other measures to help households cope with gas and electricity prices that shot up this year. Economic growth should hit 4.6 percent this year, and about 1.5 percent next year.
That will account for a temporary deficit of 3 percent of GDP next year, near the normal limit set by the European Union.
Income and Households
- The minimum wage will increase by 10.15 percent at once, instead of by 7.5 percent in three steps.
- The minimum wage should be approximately 1,935 euros gross per month for full-time workers.
- Currently, the number of hours considered to be full-time can be 36, 38 or 40 hours per week. By 2024, the Cabinet wants to define a minimum wage that better accounts for the true number of hours worked by a full-time employee.
- Social benefits and state pension payments linked to the minimum wage will also increase by 10.15 percent.
- Housing benefits will increase by almost 17 euros per month.
- Social housing tenants with a low income can qualify for a 57 euro monthly rent reduction from July 2023, instead of a year later.
- Households with costs related to children will temporarily receive more money to help cover costs. In 2023, this will amount to 1,653 euros for the first child, and 1,532 euros for each additional child in the home. This is up from 1,220 euros in 2022, and about 1,000 euros for each additional child. The increase will be phased out through 2028.
- Single parents may qualify for an additional 3,848 euro subsidy, up from 3,285.
- Reimbursement for childcare will remain at a maximum of 95 percent, but will rise to 96 percent by 2025.
- Higher education students who do not live with their parents will be eligible for an additional subsidy of 165 euros per academic year from September.
- An estimated 35 million euros will be earmarked to help higher education students having difficulty paying their energy bills if they do not qualify for the energy allowance for lower income households.
- The income tax rate for the first 73,071 euros of earnings from work will fall from 37.07 percent to 36.93 percent.
- The tax on the fictive return on assets declared in Box 3 will rise to 31 percent for the 2022 income tax filing. It will rise annually by 1 percentage point to 34 percent in 2025.
- Assets of up to 57,000 euros will not be subject to a tax on fictive returns, an increase of 7,000 euros in a year, and nearly double the amount for the tax filing over 2020 income.
- The employed person's tax credit will rise to a maximum of 521 euros net per year.
- A tax deduction for self-employed people will be reduced much faster than planned. The deduction was to fall from 6,310 euros to 5,950 euros. Instead, it will fall further to 5,030 euros.
- The transfer tax for those buying a home to rent out to a tenant will rise from 8 percent to 10.4 percent.
- First-time buyers under 35 will not have to pay a transfer tax when purchasing a home in 2023 as a primary residence.
- Home buyers over 35 will continue to pay a 2 percent transfer tax for a primary residence on purchases made in 2023.
- The gift exemption for the purchase of a home will fall from 106,671 euros to 28,947 euros. The exemption will be eliminated in 2024.
- Passengers travelling by airplane will pay a flight tax of 26 euros per ticket, up from 8 euros.
- Only those who filed an objection over fictive returns applied to assets in Box 3 declared for income tax will receive compensation. This will cost 3.6 billion euros.
Energy and Fuel Costs
- A price cap on a percentage of household energy use will bring costs down to the rate charged before the war in Ukraine sent gas and electricity prices soaring. The reduced payments will begin as an estimate in November, and will take full effect in January. It will average out to a 190 euro monthly discount.
- The energy price cap will apply to some small and mid-sized businesses.
- Low-income households will be able to claim a 1,300 euro energy payment subsidy from their municipality.
- A 50-million euro emergency fund will be set up to help prevent households from defaulting on their energy bills.
- Household electricity and gas connections will remain active through April even if customers fall far behind on payments.
- The temporary cut on petrol and diesel excise tax will be extended until July 2023.
- VAT will no longer be charged on solar panel purchases from January.
- The tax-free allowance to reimburse employees' travel expenses will rise from 19 cents to 21 cents in 2023.
- Oil and gas companies will pay higher mining levies equal to an estimated 2.8 billion euros next year and the year after.
- The premium for the basic health insurance package will rise to a maximum of 137 euros per month, an increase of 11 euros equivalent to over 8 percent.
- The maximum healthcare allowance will increase to 154 euros per month
- A temporary additional healthcare allowance of 412 euros will be introduced only for 2023
- The tax on tobacco will rise in April by 1.22 euros, bringing the price of a pack of cigarettes cost about 9 euros. It will rise by another euro the following year.
- The tax on soft drinks will increase to 20 cents per liter in 2023, and 23 cents in 2024.
- The soft drink tax will no longer apply to mineral water from 2024.
- An estimated 103 billion euros will be spent on healthcare in 2023, the first time the total will top 100 billion.
- Protection against rotavirus will be added to the vaccination program for children.
- About 30 million euros will be readied this year to replace the nuclear reactor producing medical isotopes in Petten, Noord-Holland. That will rise to 129 million euros next spring. The current reactor is 60 years old.
- The Cabinet earmarked 1 billion euros to compensate students ineligible for the basic study grant.
- Spending on higher vocational education will be increased by an additional 150 million euros to 350 million euros.
Asylum Seekers and Refugees
- Roughly 2.6 billion euros will be earmarked to organize housing and care for Ukrainian refugees.
- Over 1 billion euros will be allocated through 2027 to provide shelter and care for asylum seekers from other countries, the integration of refugees, and housing for refugees who are granted residency.
- The asylum process will be boosted by 145 million euros to improve living conditions in the region where asylum seekers originate, to reduce the need for people to seek asylum in the Netherlands.
- Spending on foreign affairs will rise by tens of millions of euros to support embassies, human rights policy, Dutch citizens living abroad, and Dutch entrepreneurs and businesses operating abroad.
Crime and Prisons
- Some 40 million euros will go to tackling organized crime. This will rise to 100 million euros in 2025.
- Another 143 million euros will be used to prevent young people from entering organized crime.
- The Cabinet will spend 20 million euros to combat drug trafficking at ports, airports, and other logistics hubs.
- The prison and institutional system will see spending rise to 70 million euros next year, and 210 million euros by 2026. This will include an increase in forensic care spending.
- Investments of 34 million euros to tackle crimes arranged by prisoners will be made in 2023, and 24 million euros more will be spent in 2024.
- An estimated 2 million euros will be readied for work training and education for prisoners.
Infrastructure, Farming and Fishing
- A total of 4 billion euros will be spent on infrastructure, including 2 billion for railroad improvements, 1 billion for roads, 500 million for water management, and 500 million for waterways.
- A total of 340 million euros will be earmarked to make livestock farming more sustainable and reduce nitrogen emissions.
- More sustainable investments in the fishing industry will be made, equaling 181 million euros in 2023.
- Greenhouse horticulture spending and subsidies for energy efficiency will increase to 77 million euros.
The Caribbean Netherlands
Sixteen million euros will be allocated to improve purchasing power of households on Bonaire, Saba, and Sint Eustatius. This includes 1,300 dollars for lower income households to pay energy bills, an increase in state pension of about 150 dollars monthly, child benefit increases of 40 dollars per month, a reduction in childcare costs by about 50 dollars per month, and an increase in the amount of income not subject to tax.