Reduction in 30 Percent Expat Ruling to Impact Knowledge Migrants
Cutting the 30 percent expat ruling in the Netherlands is expected to lead to 10-15% fewer knowledge migrants, potentially affecting the country’s economic competitiveness.
Historical Context and Policy Changes
The 30 percent ruling has been an integral part of the Dutch tax framework designed to attract highly skilled expatriates. Until recently, expatriates in the Netherlands could enjoy a tax exemption on 30 percent of their salary for the first five years of their stay. However, a recent policy change initiated by GroenLinks-PvdA, Volt, ChristenUnie, and Pieter Omtzigt, the current chairman of the NSC, has drastically altered this landscape[1]. Now, expatriates can only benefit from the 30 percent tax-free allowance for the first 20 months, followed by a reduced benefit of 20 percent for the next 20 months, and 10 percent thereafter.
Projected Impact on Knowledge Migrants
According to a report by SEO Economic Research commissioned by the Dutch Senate and the Tweede Kamer, the lower house of the Dutch parliament, this policy change is projected to result in a 10-15 percent reduction in the number of knowledge migrants coming to the Netherlands[1]. Given that approximately 110,000 expatriates utilized the 30 percent tax ruling in 2022, this reduction could translate to a significant number of highly skilled workers opting for other countries with more favorable tax schemes[1].
Economic Implications
The reduction in the influx of knowledge migrants could have far-reaching economic consequences. The SEO Economic Research report highlights that the 30 percent scheme generates more tax revenue than it costs, as knowledge migrants tend to have higher incomes. Therefore, reducing or abolishing this scheme might negatively impact tax revenues and deter companies from investing in the Netherlands[1]. Business associations like VNO-NCW, MKB-Nederland, and FME have voiced concerns, stating that the cuts to the 30 percent ruling are detrimental to the Netherlands’ future. They argue that to maintain prosperity and well-paid jobs, the country needs to attract top talent, especially in technical fields, and the 30 percent ruling has been a crucial tool in this regard[1].
Political Reactions
The policy change has not been without controversy. In March 2024, the business industry’s concerns reached the Tweede Kamer, with parties like D66, BBB, and CDA expressing opposition to the cuts[1]. CDA leader Henri Bontenbal remarked that cutting back on the expat scheme was a mistake and that dealing with multiple motions under time pressure led to unintended damage[1]. With the VVD’s 24 seats and the three opposing parties holding 21 seats in the Tweede Kamer, nearly a third of the 150 parliamentarians are against the cuts, signaling potential political challenges ahead[1].
Conclusion
The reduction of the 30 percent expat ruling in the Netherlands is expected to have a significant impact on the country’s ability to attract highly skilled workers. With a projected 10-15 percent decrease in knowledge migrants, the policy change could affect the Netherlands’ economic competitiveness and tax revenues. The controversy surrounding the cuts underscores the complex balance between fiscal policies and economic growth, highlighting the need for careful consideration of such impactful decisions.