OECD criticizes Dutch tax system, climate plan

The Organization for Economic Co-operation and Development (OECD) said in a new report on the Dutch economy that the Dutch tax system is needlessly complex. Critics from the think tank say the complexity of the tax system is driving inequality. Furthermore, the Dutch government’s climate change plan is inadequate and too focused on the short term. Conscious investments need to be made to further shape the future beyond 2030.

Therefore, the tax system should be simplified. The OECD believes the mortgage interest income tax credit should be abolished. In addition, the mortgage ceiling, which is currently 100% of the purchase price, should be further reduced to 90%. This measure should make Dutch household debt less expensive and less vulnerable should interest rates rise further. Furthermore, the OECD notes that many mortgage rates remain fixed for long periods of time, which eliminates some vulnerabilities.

The Dutch economy in general is doing well, in part because of economic support measures such as energy price caps and lower excise taxes on petrol and diesel. The measures are far-reaching and do not target specific segments of the population and should be phased out, the think tank said. Instead, we need institutions for those who really need it.

In this context, the OECD also noted the benefit system, which should be simplified. Entry into the labor market is hindered because people fear that they will lose certain social arrangements once they start working or working longer hours.

The Dutch economy is also heavily dependent on fossil fuels, the report notes. As a result, the Cabinet’s 2030 target is at risk of not being achieved. Current plans are to reduce greenhouse gases by 55% compared to 1990. The government is primarily focused on increasing the use of renewable energy. However, due to tax incentives and subsidies for large consumers, oil and gas, which are cheaper than sustainable energy, are still heavily used.

Therefore, the government should invest more in green innovation research and development. In particular, support should also be given to scale-up, a stage that requires more funding. Without such investments, the energy transition is at risk of slowing down after 2030.