D66, CDA coalition plan restores 30% expat tax break; More homes, conscription, climate deal

Dutch political parties D66 and CDA submitted a 17-page plan on Tuesday outlining their proposals to form a new governing coalition in the Netherlands. Key points in the plan include restoring the income tax break for highly-skilled workers recruited from abroad that allows them to keep up to 30 percent of their income tax free for five years. The centrist D66 and center-right CDA also have an ambition to substantially increase residential home construction, to make it easier for students to share an apartment with other flatmates, a partial return to military conscription, the continuation of the asylum seeker distribution law, and a concept for tackling the nitrogen emissions crisis.

Expat tax break

The two parties want to roll back the policy enacted over the past two years to begin reducing the expat tax break known as the 30 percent ruling. The tax break is supposed to reduce down to 27 percent by 2027, affecting those who were granted the tax break since January 2024. The current government also wants to increase the minimum salary required to qualify for the tax break by about 10 percent compared to 2024 rates of 46,107 euros annually for most workers, and 35,048 for those under 30 with a master’s degree.

The sharp attack on the tax break came during the run-up to the November 2023 elections, but was quickly criticized by the country’s largest and most valuable companies, particularly high-tech firm ASML. The new plan from D66 and CDA makes it clear the two parties believe, “The Netherlands has a great need for skilled professionals and bright minds. We want to be a country that does not retreat behind the dikes, and where people can develop their talents,” the document states.

While the plan does not go into specific detail, it outlines a clear need for the country’s research institutions to be able to recruit “top researchers and top talent from abroad.” Reinstating the expat tax scheme is key to this, as is improving the highly-skilled worker scheme and joining the European Union talent pool, the parties said.

They plan to do this by investing further in scientific research and digital infrastructure, and valuing breakthroughs that can bring new knowledge and new techniques “to the market more frequently and effectively.” The parties also want to invest further in campuses to foster startups and scale-ups, and to restore the regional vocational training investment fund to train more people to resolve the labor shortages facing critical sectors.

While the expat tax rule should be restored, the two parties do want to see the eventual elimination of the tax break given to homeowners who pay interest on the financing of their residence. “To make the housing market more accessible, we are adjusting the homeownership regulations. This includes gradually phasing out the mortgage interest deduction from the moment it becomes feasible, with a refund in income tax so that homeowners do not face financial challenges,” the document states.

Housing

A key issue is the ongoing inability to build 100,000 new homes annually, said D66 leader Rob Jetten and CDA leader Henri Bontenbal in their document. Three successive Cabinets have failed to even come close to that target, but the next coalition can accomplish the goal by “by making better use of existing buildings and building new ones” which better address a society where households are shrinking, more people are growing older, and a higher number of individuals are living alone.

“For many people in the Netherlands, the housing shortage is a daily reality. Young people who cannot find a place to build up their lives, families living in cramped, poor-quality housing and neglected neighborhoods, and seniors who cannot move in to suitable housing,” the parties said. “The voices of those seeking housing are not heard enough. That’s why reducing the housing shortage is our top priority.”

New housing needs to meet targets where 30 percent of residential properties go to social housing, and two-thirds are considered to be affordable. Regulatory obstacles, like interminable objection procedutres, need to be eliminated so that home construction can be completed in under ten years, they said

“We also want to make home-sharing easier,” the parties said, both for young and old. The parties want “more shared housing options for young people and students,” and “fewer studios and more cohabitation” options to quickly resolve one affordable housing bottleneck that “also helps to combat loneliness.”

They can hit the ground running by better utilizing existing buildings, while also “expanding cities and towns,” they said. “We will build at least 21 large-scale new construction sites” that will substantially tackle aspects of the housing shortage by creating “new neighborhoods, but also new cities,” an apparent nod towards D66's campaign pledge to build ten new cities.

Although budget earmarks already exist for 21 large-scale housing sites, the two parties want to advance beyond current plans. Instead of these being concrete canyons, the parties also appreciate the need to incorporate green spaces, accessibility, and proximity between housing and work.

Families and informal caregivers should be allowed to house someone who needs assistance without the need to apply for a permit, Family and informal care homes on private property will become permit-free, and obstacles to hospitality rentals will be removed.

They propose a significant budget for infrastructure supporting new housing and a major investment package for key building sites between 2030 and 2040, though no exact figures are provided. Much of the coalition document also reflects existing policy.

International research

There will also be more investment in international research. The parties hope to come closer to the Lisbon target of investing 3 percent of the GDP in innovation. The government has set a target of at least 1% of GDP for public investment in research and development.

Priority will be given to sectors vital to the Netherlands’ future, like high-tech manufacturing, green chemistry, energy, water, and maritime industries, Artificial Intelligence (AI), and agri-food. Innovation incentives will also be used to strengthen the Dutch defense industry.

The rise in public R&D spending is intended to enhance the Netherlands’ long-term economic potential and increase productivity. The plan includes expanding experimental space for young technology companies and providing support for regional innovation clusters. Key technologies will be promoted with the aim of developing Dutch and European companies into global frontrunners.

Asylum and migration

In their draft coalition agreement, D66 and the CDA propose “modernizing” the UN Refugee Convention so that asylum claims can be filed and processed outside Europe. The move appears aimed in part at JA21, which campaigned on revising the convention.

“This would allow recognized refugees to be resettled across Europe and help curb the inhumane practices seen around the Mediterranean,” D66 and the CDA write in their coalition document. D66 leader Rob Jetten also proposed adjusting the refugee convention for this purpose last summer.

The parties also want to introduce a two-tier asylum system, dividing asylum seekers into two groups, with one group receiving fewer rights. A proposal from the outgoing Schoof cabinet on this will soon be taken up by the Senate. In the Tweede Kamer, D66 and the CDA voted against the measure, partly due to concerns about how it would be implemented.

Jetten said he had “listened closely” to the COA and the IND. The organizations responsible for sheltering asylum seekers and handling their applications “need this to restore order to the asylum chain,” the D66 leader stated.

CDA and D66 also want to ease pressure on the asylum system by adding 41,000 permanent and 29,000 flexible reception places, as previously agreed with the Cabinet in 2023. To achieve this, they say “multi-year funding” based on “realistic forecasts” is required. The current Cabinet plans deep cuts to asylum reception: the budget is 4.2 billion euros for 2026, dropping to 922 million euros in 2027. The Court of Audit has been critical of these plans.

Military conscription

D66 and CDA also propose partially reinstating conscription if recruitment for the armed forces falls short in the coming years. “If the military’s expansion does not progress quickly enough, we are preparing a selective draft,” the document states.

The armed forces must have at least 122,000 personnel within five years. To encourage youth participation, they propose a defense orientation program enabling “every young Dutch citizen to choose to spend some time serving the country.” If recruitment levels remain insufficient, the parties plan to reintroduce conscription on a partial basis.

Power grid overloads

To tackle power grid overloads, D66 and CDA plan a proposed “Crisis Electricity Grid Law.” The law would speed up approval processes, allow intervention if grid expansion stalls, and optimize the existing network through measures such as variable electricity tariffs or flexible contracts. “Tackling grid congestion issues is our top priority,” the parties write.

D66 and CDA are prioritizing electrification, alongside the production of green gas and hydrogen. The hydrogen sector, covering production, distribution, and use, is currently developing slowly. The parties propose creating a “National Investment Agency” to promote industrial sustainability and scale up renewable energy production. They also support additional government funding for CO2 storage under the North Sea.

Following the precedent of previous governments, they want the Groningen gas field to remain closed and no new gas extraction beneath the Wadden Sea. During the election campaign, JA21, a possible future coalition partner, suggested reopening the Groningen field in case of emergencies.

Environment

D66 and CDA aim to reach the legal nitrogen reduction target by 2035 and the interim goal by 2030. If these targets cannot be met, farmers might ultimately have to give up the rights required to maintain their livestock.

The parties emphasize that the government should set clear, overarching targets for reducing nitrogen, CO2, and water pollution, while allowing farmers to decide how to achieve them. They plan to maintain current exit schemes for farmers and prioritize restoring nature areas most in need of attention.

The coalition plans largely reflect the parties’ election platforms and continue policies initiated by the Rutte IV cabinet. They also incorporate the Schoof cabinet’s ideas on swapping the so-called critical deposition value and reducing the calculation standard. The parties, however, attach conditions related to nitrogen reduction, and the measures must be able to hold up in court.

Discussions with parliament

The coalition document is also meant to serve as “an invitation” for other parties to join a potential government. D66 and CDA are particularly looking at GroenLinks-PvdA, VVD, and JA21. On Monday evening, D66 leader Rob Jetten and CDA leader Henri Bontenbal said the document offers points of common ground for all these parties.

Informateur Sybrand Buma will meet with all party leaders in the Tweede Kamer, the lower house of the Dutch parliament, in the coming days to discuss the document. He intends to gather each party’s views on its content and whether they are willing to take part in a coalition or offer “constructive” support. “I hope all factions approach the document with an open mind,” Buma said when presenting his interim report to President of the Tweede Kamer, Thom van Campen.