This is evident from documents that were recently sent to the House of Representatives.
Childcare later free
The original plan was to make childcare virtually free for everyone from 2025. That is good for labor participation and we will immediately get rid of childcare allowance. But that plan was postponed for at least two years because it turned out to be unfeasible.
In parallel, a tax benefit for working parents would also be phased out: the so-called Income-related Combination Credit (IACK). This tax credit ensures that the lowest-earning parent has to pay less tax.
Because making childcare free and the IACK have more or less the same goal, to promote labor participation, it was logical that the tax benefit would be abolished if childcare became free.
One postponed, then the other
The plan was to completely abolish the IACK for new cases from 2025 and to leave it in place until 2037 through a transitional arrangement for existing parents. You only get the IACK with children up to 12 years old, so in 2037 the last children born before 2025 would have reached that age.
A number of MPs sounded the alarm, because delaying making childcare free should also lead to delaying the phasing out of the IACK. If this does not happen, this means that parents who have a child in 2025 or 2026 will miss out on their tax benefit, but will also not receive childcare for free. Sour, not sweet.
The outgoing cabinet recognizes this problem and has put forward a number of alternatives on which the House must make a decision. But whatever choice is made, existing parents are in danger of worsening.
Simple solution too complicated
Apparently it is all very simple: abolish the tax benefit two years later, with the associated transitional arrangement for existing parents, and everything else remains the same. It’s just being pushed forward two years.
But that won’t work anyway, State Secretary Marnix van Rij (Finance) writes to the House of Representatives. Two years later, the Tax Authorities are far too busy with other matters, such as the new wealth tax.
Other options bad for existing cases
The other options are apparently somewhat easier to implement, but they do represent a major setback for existing cases.
The second option is to gradually reduce the tax credit in all cases, whether the child was born before 2027 or after. This is an advantage for parents who have their first child after that date, because they will still have a tax benefit for years to come, and with the old plan they would receive nothing.
But for existing parents, the phasing out of the tax credit means a burden that can amount to thousands of euros per year. In 2030, this will amount to a maximum of around 1,000 euros, and in 2038 this will even increase to a disadvantage of almost 3,000 euros. After all, in the old situation they would fully benefit from the deduction for a maximum of 12 years, and in this option this will decrease every year.
Parents naturally lose the discount earlier when their youngest child turns 12. Then the discount always stops.
Other options especially nice for treasury
Options three and four are in fact the same as option two, but the tax credit is phased out much more quickly. For existing parents, this means that they will miss out on more than 3,000 euros as early as 2033 or 2035.
These two options are very attractive for the government treasury. Compared to the old plan, this will yield 446 million to 3.6 billion euros for the treasury.
Rooms to move on
Because the cabinet is outgoing, it has chosen not to come up with a proposal to adjust the existing plan. It is therefore up to parliament to make a decision, writes Van Rij. If the House wants any adjustments, they must be adopted by both the House of Representatives and the Senate before the end of this year.
2023-10-02 08:44:16
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