Richest 1 percent of Dutch pay significantly less tax than compatriots: CPB

The richest 140,000 Dutch people, about 1 percent of all workers in the Netherlands, pay considerably less tax than others, the Netherlands Bureau for Economic Policy Analysis (CPB) concluded in a tax and income study spanning 2011 to 2019. Their income also increased around 10 times more than others in the period studied.

The highest income groups benefitted the most from the flourishing economy between 2011 and 2019. While the real incomes of 99 percent of workers increased by between 4 and 8 percent, those of the richest 1 percent increased by over 70 percent.

That has to do with the richest Dutch primarily obtaining their income from the profits of the companies in which they are directors and major shareholders. From 2015 onwards, corporate profits only increased, and with them, the profit distributions to the owners. In 2019, a particularly large amount of corporate profit was distributed, amounting to approximately 25 billion euros.

The main way to tax this income is corporate tax. In the period studied, the 0.01 percent very richest Dutch (about 1,400 people) paid about 28 percent in taxes. While taxes consumed about 40 percent of the salary of average workers.

Rich entrepreneurs can choose to retain profits in their company for a longer period and then transfer a larger amount in one go for relatively less tax payment. The government has taken some measures to combat this imbalance, such as an increase in the tax on profit distributions that took effect this year.

The CPB proposed to levy a larger share of profit tax directly, to prevent business owners from hoarding profits in their company. But that could have consequences for the business climate in the Netherlands, the planning office added.