Dutch government to postpone corporate tax cut -source

The Dutch government is set to postpone a promised corporate tax break, demanding that companies first raise wages in response to strong economic growth, a government source said on Thursday, confirming media reports. The corporate tax rate will not be lowered in 2020, as was planned, and a tax break for 2021 will be smaller than promised, Dutch daily Het Financieele Dagblad (FD) reported.

In a surprise move, Prime Minister Mark Rutte in June already said the planned two-phased tax cut from 25% to 20.5% by 2021 could be reconsidered if companies did not raise wages more. Coalition parties have now agreed to keep the rate unchanged in 2020, while limiting the possible cut in 2021 to 21.7%.

That cut could still be taken off the table, if there is no clear evidence of rising pay for workers, the FD said. Rutte's government has been struggling to keep its promise of improving living standards for all in the Netherlands, as the economy continues to outperform its European peers.

Economic growth in the Netherlands reached decade-highs of almost 3% in the past two years, and held steady at 0.5% in the second quarter of 2019 despite worrying signs of a recession in Germany. But wages and pensions have failed to keep pace with the rising costs of living, fuelling strikes by teachers, transport workers and others.

Meanwhile, corporate taxes have become a hot political issue after revelations that many multinational companies with headquarters in the Netherlands, including Shell and Philips, paid little or no corporate tax there in 2018. The government will present next year's budget plans on Sept. 17.

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