Budget leak again shows cut to 30% ruling, slight purchasing power increase

The income tax benefit given to some foreign workers recruited abroad will indeed be cut as was previously expected, according to a leaked copy of the Dutch Cabinet's budget plans for 2025. The plan will be formally presented on Tuesday, and includes the expectation that households will see a marginal purchasing power increase of 0.7 percent.

Several aspects of the budget leaked out already, including the change to the expat tax benefit. The tax reduction allows permitted workers to keep 30 percent of their income tax free, but this will fall to 27 percent.

The benefits was initially intended to be slashed to just 10 percent after a proposal from NSC leader Peter Omtzigt passed with substantial support in Parliament. The measure was introduced suddenly during the campaign for elections in the Tweede Kamer, the lower house of Parliament. Several parties during that campaign took tough stances against foreign workers and international students, to the ire of multinational businesses headquartered in the Netherlands.

The budget also reiterates what the Cabinet said about income taxes in its full plans for its term. Specifically, that a new tax bracket will be introduced to the progressive system, and that the lowest marginal bracket will be reduced.

Additionally, the Cabinet confirmed that the real estate transfer tax for those who purchase a property where they will not live should come down to 8 percent. Currently, that figure is 10.4 percent. The Cabinet believes this will incentivize investors to enter the rental market.

The leaked memo notes that money will also be found to keep a program that makes it possible for schools to provide meals and groceries to students living in poverty. This was previously reported earlier this month after outcry from opposition parties.

Defense spending will also rise by about 750 million euros next year. The military should be able to count on structural increases of 500 million euros to its annual budget. That does not include an extra 130 million euros for border control measures.

The budget means an average household purchasing power increase of 0.7 percent for working adults, well below the expected 1.1 percent projected by policy advisors earlier this year. The expectation is that people earning a maximum of about 50,000 euros per year should see purchasing power grow more than anyone, with an increase of about 1.1 percent.

But those who earn minimum wage or slightly better than that will see spending power rise by just 0.5 percent. Pensioners and families with children will see purchasing power grow by only 0.6 percent. Families without children should see improved spending power of about 0.8 percent, and benefit recipients will improve their position by 0.9 percent.

The budget plans, early coalition agreement, and current Cabinet policy statement have been criticized for putting heavy amounts of spending and some social measures in the first period of the Cabinet's four-year term, and kicking the can down the road when it comes to paying for the plan. Finance Minister Eelco Heinen wrote in the leaked budget memo that this is not the case.

"After all, money must first be earned before you can spend it," he wrote. "This Cabinet wants to be frugal with scarce resources so that we can adapt to changing circumstances, and generations after us can also enjoy them."