Economic Sustainability
#10Key Findings
The Netherlands falls into the upper-middle ranks (rank 10) in the category of economic sustainability.
The country has had a circular economy strategy since 2016, but commitment has been hesitant. A national coordinator oversees critical infrastructure policies, with line ministries establishing general frameworks for their sectoral areas. Progress toward decarbonization has been slow, but a new plan has sought to speed the transition.
Unemployment rates are low, and companies report labor shortages. Labor-market policies focus on those already within the labor market, while vulnerable job seekers receive less support. Discrimination against workers with a non-Western background is a concern.
Income taxes are progressive, and income redistribution is considerable. Externalities are addressed both with taxes and financial incentives. State spending has increasingly featured the use of special funds outside the regular budget, diminishing oversight. R&D spending is comparatively high. The country is viewed externally as a tax haven.
The country has had a circular economy strategy since 2016, but commitment has been hesitant. A national coordinator oversees critical infrastructure policies, with line ministries establishing general frameworks for their sectoral areas. Progress toward decarbonization has been slow, but a new plan has sought to speed the transition.
Unemployment rates are low, and companies report labor shortages. Labor-market policies focus on those already within the labor market, while vulnerable job seekers receive less support. Discrimination against workers with a non-Western background is a concern.
Income taxes are progressive, and income redistribution is considerable. Externalities are addressed both with taxes and financial incentives. State spending has increasingly featured the use of special funds outside the regular budget, diminishing oversight. R&D spending is comparatively high. The country is viewed externally as a tax haven.
Graph View
Graph View
How committed is the government to driving the transition toward a circular economy?
10
9
9
The government is clearly committed to transitioning to a circular economy.
8
7
6
7
6
The government is largely committed to transitioning to a circular economy.
5
4
3
4
3
The government is somewhat committed to transitioning to a circular economy.
2
1
1
The government is not at all committed to transitioning to a circular economy.
The Netherlands has had a circular economy (CE) strategy since 2016. Its goals include a 50% reduction in raw material consumption by 2030 and a full-fledged CE by 2050. The strategy has been updated several times. The National Circular Economy Program (NCPE) 2023 – 2030 is the most recent such update. It aims for four general subgoals: 1) reducing raw material usage, for example via a significant increase in circular procurement (see Manifest Maatschappelijk Verantwoord Opdrachtgeven en Inkopen (MVOI) 2022 – 2025); 2) substituting raw material, for example by mandating a percentage of recycled content; 3) extending product lifetimes, especially through a registry for repairers of electric and electronic goods; and 4) transitioning to high-grade processing, for example by reducing waste incineration by subnational governments and firms, and improving waste separation by residents.
Subgoals are directed to the overall most impactful product groups: consumer goods (electronics, textiles, packaging), plastics (in packaging, industry and agriculture), construction (housing, concrete viaducts and bridges, road surfaces) and manufacturing (wind farms, solar PV systems, climate control systems).
The NCPE 2023 is the national policy response to continuous progress monitoring and policy evaluation, most recently the second Integrated Circular Economy Report 2023, published by the National Environmental Assessment Agency (Planbureau voor de Leefbaarheid, PBL). This is the coordinating body of a consortium of knowledge institutes permanently engaged in improving and expanding CE indicators and their observation and measurement. The findings of monitoring run counter to the image of the Netherlands as a frontrunner in the CE transition. This image is based merely on its 2022 top score in the EU in the category of circular material use rate. The overall realistic conclusion is that limited progress is visible in parts of the transition process, and that there are no clear signs of transition acceleration. This suggests that accelerating the transition process is crucial, given the significant level of ambition. Carrying out an acceleration and intensification of CE policy will require a cabinet-wide approach and intensive involvement of all ministries. Ensuring that raw materials are handled significantly more efficiently will require changes in the rules of the game, tax incentives and international trade that affects the policy areas of different ministries.
In the Rutte IV government, the secretary of state (a cabinet member ranked beneath a minister) for infrastructure and water management was responsible for coordinating the transition. This means that she was tasked with implementing initiatives to accelerate the transition throughout the Netherlands and in all sectors, working together with all policy partners in the area of the circular economy. The current product chains involve the Ministry of the Interior and Kingdom Relations (construction, plus coordinating ministry for spatial planning), the Ministry of Economic Affairs and Climate (industry, plus coordinating ministry for climate), the Ministry of Agriculture, Nature and Food Quality (agriculture), the Ministry of Infrastructure and Water Management itself, and the Department of Foreign Trade and Development Cooperation (in Dutch: Buitenlandse Handel en Ontwikkelingssamenwerking or BHOS). Once every two years, the secretary of state holds bilateral meetings with the ministers of these ministries on the progress made to see whether any adjustments are needed.
In typical Dutch collaborative governance, or the poldering style, the secretary of state chairs a National Administrative Consultation Platform (in Dutch: Bestuurlijk Overleg). All parties involved are represented in this group, including the Association of Netherlands Municipalities, the Association of Provinces of the Netherlands, the Association of Water Authorities, VNO-NCW, MKB-Nederland, MVO Nederland, FNV, VCP, Natuur & Milieu, and De Jonge Klimaatbeweging, as well as the ministries involved in implementation and the chairpersons of the transition teams. It is still being investigated how knowledge institutes, financial institutions and consumer organizations can be part of the National Administrative Consultation Platform.
All in all, it looks like everything is “Dutch normal.” From the content perspective, circular economy policy, governance procedures and monitoring look fine at first glance; but a look inside the implementation practices and collaborative arrangements, along with an evaluation of policy outputs to date, reveals a policy of delay, procrastination and deliberate blind spots. Judging by deeds rather than words, the government’s real commitment to transitioning to a circular economy is hesitant and questionable.
Citations:
PBL. 2023. “Integrated Circular Economy Report.”
Ministry of Infrastructure and Water Management. 2023-2030. National Circular Economy Programme: Summary.
National Circular Economy Programme
2023-2030 (pdf)
Overgang naar circulaire economie vraagt om intensivering beleid door nieuw kabinet
01-02-2022 | Nieuwsbericht
European Topic Centre on Circular Economy and Resource Use. 2022. “Circular Economy Country Profile - The Netherlands.” https://www.eionet.europa.eu/etcs/etc-ce
RIVM, Circulaire economie: wat we willen weten en kunnen meten
Systeem en nulmeting voor monitoring van de voortgang van de circulaire economie in Nederland, Den Haag, 2018
Provincie Noord-Brabant. 2021-2023. “Meerwaarde met Kringlopen, Uitvoeringsagenda. Circulaire Economie.”
Binnenlands Bestuur. 2023. “Versnelling in de circulaire economie? Regionale samenwerking noodzakelijk.” November 3.
Rijksoverheid.nl. “Overheden maken impact met Maatschappelijk Verantwoord Opdrachtgeven en Inkopen.” URL
Nieuwsbericht | 24-11-2022
Subgoals are directed to the overall most impactful product groups: consumer goods (electronics, textiles, packaging), plastics (in packaging, industry and agriculture), construction (housing, concrete viaducts and bridges, road surfaces) and manufacturing (wind farms, solar PV systems, climate control systems).
The NCPE 2023 is the national policy response to continuous progress monitoring and policy evaluation, most recently the second Integrated Circular Economy Report 2023, published by the National Environmental Assessment Agency (Planbureau voor de Leefbaarheid, PBL). This is the coordinating body of a consortium of knowledge institutes permanently engaged in improving and expanding CE indicators and their observation and measurement. The findings of monitoring run counter to the image of the Netherlands as a frontrunner in the CE transition. This image is based merely on its 2022 top score in the EU in the category of circular material use rate. The overall realistic conclusion is that limited progress is visible in parts of the transition process, and that there are no clear signs of transition acceleration. This suggests that accelerating the transition process is crucial, given the significant level of ambition. Carrying out an acceleration and intensification of CE policy will require a cabinet-wide approach and intensive involvement of all ministries. Ensuring that raw materials are handled significantly more efficiently will require changes in the rules of the game, tax incentives and international trade that affects the policy areas of different ministries.
In the Rutte IV government, the secretary of state (a cabinet member ranked beneath a minister) for infrastructure and water management was responsible for coordinating the transition. This means that she was tasked with implementing initiatives to accelerate the transition throughout the Netherlands and in all sectors, working together with all policy partners in the area of the circular economy. The current product chains involve the Ministry of the Interior and Kingdom Relations (construction, plus coordinating ministry for spatial planning), the Ministry of Economic Affairs and Climate (industry, plus coordinating ministry for climate), the Ministry of Agriculture, Nature and Food Quality (agriculture), the Ministry of Infrastructure and Water Management itself, and the Department of Foreign Trade and Development Cooperation (in Dutch: Buitenlandse Handel en Ontwikkelingssamenwerking or BHOS). Once every two years, the secretary of state holds bilateral meetings with the ministers of these ministries on the progress made to see whether any adjustments are needed.
In typical Dutch collaborative governance, or the poldering style, the secretary of state chairs a National Administrative Consultation Platform (in Dutch: Bestuurlijk Overleg). All parties involved are represented in this group, including the Association of Netherlands Municipalities, the Association of Provinces of the Netherlands, the Association of Water Authorities, VNO-NCW, MKB-Nederland, MVO Nederland, FNV, VCP, Natuur & Milieu, and De Jonge Klimaatbeweging, as well as the ministries involved in implementation and the chairpersons of the transition teams. It is still being investigated how knowledge institutes, financial institutions and consumer organizations can be part of the National Administrative Consultation Platform.
All in all, it looks like everything is “Dutch normal.” From the content perspective, circular economy policy, governance procedures and monitoring look fine at first glance; but a look inside the implementation practices and collaborative arrangements, along with an evaluation of policy outputs to date, reveals a policy of delay, procrastination and deliberate blind spots. Judging by deeds rather than words, the government’s real commitment to transitioning to a circular economy is hesitant and questionable.
Citations:
PBL. 2023. “Integrated Circular Economy Report.”
Ministry of Infrastructure and Water Management. 2023-2030. National Circular Economy Programme: Summary.
National Circular Economy Programme
2023-2030 (pdf)
Overgang naar circulaire economie vraagt om intensivering beleid door nieuw kabinet
01-02-2022 | Nieuwsbericht
European Topic Centre on Circular Economy and Resource Use. 2022. “Circular Economy Country Profile - The Netherlands.” https://www.eionet.europa.eu/etcs/etc-ce
RIVM, Circulaire economie: wat we willen weten en kunnen meten
Systeem en nulmeting voor monitoring van de voortgang van de circulaire economie in Nederland, Den Haag, 2018
Provincie Noord-Brabant. 2021-2023. “Meerwaarde met Kringlopen, Uitvoeringsagenda. Circulaire Economie.”
Binnenlands Bestuur. 2023. “Versnelling in de circulaire economie? Regionale samenwerking noodzakelijk.” November 3.
Rijksoverheid.nl. “Overheden maken impact met Maatschappelijk Verantwoord Opdrachtgeven en Inkopen.” URL
Nieuwsbericht | 24-11-2022
Graph View
How committed is the government to updating and protecting critical infrastructure?
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9
9
The government is clearly committed to updating basic technical infrastructure.
8
7
6
7
6
The government is largely committed to updating basic technical infrastructure.
5
4
3
4
3
The government is somewhat committed to updating basic technical infrastructure.
2
1
1
The government is not at all committed to updating basic technical infrastructure.
Under the oversight of the minister of justice and security, a National Coordinator for Counterterrorism and Security (NCTV) coordinates viable critical infrastructure policies. These cover the areas of energy, telecommunications/internet, transportation, drinking water, surface water, chemicals, nuclear, financial transactions, government information (like civil registration and government-citizen communication), defense – and since very recently. healthcare institutions. This vast policy field is fragmented over seven ministries: Economic Affairs and Climate; Infrastructure and Water Management; Finance; Internal and Kingdom Affairs; Justice and Security; Defense; and Public Health, Welfare and Sports.
In each case, the line ministry establishes general frameworks for the sectors under its responsibility. This includes sectoral policies, laws and regulations, as well as implementation of the “vital cycle” – that is, assessing whether a given process or service is “vital.” It also provides support such as simulation and training. The assessment of whether a process or service is vital is made by the responsible line department. This involves analyzing whether the disruption, failure, or manipulation of a process or service could have such serious consequences that it could damage national security.
Within these processes, one or more organizations – such as private companies, independent administrative bodies and parts of the central government – are important for the continuity and resilience of the process. These organizations are referred to as the “vital providers.” Vital providers are informed of this status by the line department. Security regions provide support to vital providers in the event of imminent disruption or failure when capabilities are inadequate and public order and safety are at risk. For example, during the COVID-19 pandemic, safety regions were the implementers of lockdown and other public safety measures.
The National Coordinator for Counterterrorism and Security (NCTV) serves as a coordinator in efforts to protect vital infrastructure. This involves a cross-sectoral approach, and entails activities such as drawing up general policy documents and legislation, and developing resilience-enhancing instruments such as the vital cycle. Within the digital domain, the National Cybersecurity Center (NCSC) provides assistance to vital providers, and generates information and advice on threats and incidents.
Although the Netherlands has a reputation for high-quality infrastructure such as roads, waterways and public transport, the Ministry of Infrastructure and Waterways reports a decline: more and longer traffic jams; overdue maintenance for bridges, dikes and river/canal banks; diminishing numbers of bus connections; and more disruptions and less frequent train connections. The ministry has been forced to change its priorities from expansion to maintenance. Another area in which critical infrastructure is endangered is electricity grid congestion. Several new firms and even citizens trying to install home heating water pumps are lining up, waiting for expansion projects to be completed.
Citations:
Nationaal Coördinator Terrorismebestrijding & Veiligheid (NCTV). “Vitale Infrastructuur, Overzicht Vitale Processen.”
NCTV, Rollen en Verantwoordelijkheden
VPNGids.nl. 2023. “Minister Kuipers verklaart zorgsector als vitale infrastructuur.” https://VPNGids.nl.
Minister Kuipers verklaart zorgsector als vitale infrastructuur
Ministerie van Justitie en Veiligheid, Nationaal Cybersecurity Centrum. 2023. “Cybersecuritybleid Nederland.” ncsc.nl
Rijkswaterstaat (Ministerie van I&W). 2023. “Rapport Staat van de Infrastructuur Rijkswaterstaat.”
NRC. 2023. “Nederland en Duitsland bundelen hun landmacht. Defensiesamenwerking De bevelhebbers van de Nederlandse en de Duitse landmacht zijn eruit: de gevechtseenheden worden samengevoegd.” January 31.
NRC, Benjamin. 2022. “Mobiliteit. NS laat opnieuw minder treinen rijden, en het ov is voor velen nauwelijks meer een manier om op werk of school te komen.” NRC October 31.
In each case, the line ministry establishes general frameworks for the sectors under its responsibility. This includes sectoral policies, laws and regulations, as well as implementation of the “vital cycle” – that is, assessing whether a given process or service is “vital.” It also provides support such as simulation and training. The assessment of whether a process or service is vital is made by the responsible line department. This involves analyzing whether the disruption, failure, or manipulation of a process or service could have such serious consequences that it could damage national security.
Within these processes, one or more organizations – such as private companies, independent administrative bodies and parts of the central government – are important for the continuity and resilience of the process. These organizations are referred to as the “vital providers.” Vital providers are informed of this status by the line department. Security regions provide support to vital providers in the event of imminent disruption or failure when capabilities are inadequate and public order and safety are at risk. For example, during the COVID-19 pandemic, safety regions were the implementers of lockdown and other public safety measures.
The National Coordinator for Counterterrorism and Security (NCTV) serves as a coordinator in efforts to protect vital infrastructure. This involves a cross-sectoral approach, and entails activities such as drawing up general policy documents and legislation, and developing resilience-enhancing instruments such as the vital cycle. Within the digital domain, the National Cybersecurity Center (NCSC) provides assistance to vital providers, and generates information and advice on threats and incidents.
Although the Netherlands has a reputation for high-quality infrastructure such as roads, waterways and public transport, the Ministry of Infrastructure and Waterways reports a decline: more and longer traffic jams; overdue maintenance for bridges, dikes and river/canal banks; diminishing numbers of bus connections; and more disruptions and less frequent train connections. The ministry has been forced to change its priorities from expansion to maintenance. Another area in which critical infrastructure is endangered is electricity grid congestion. Several new firms and even citizens trying to install home heating water pumps are lining up, waiting for expansion projects to be completed.
Citations:
Nationaal Coördinator Terrorismebestrijding & Veiligheid (NCTV). “Vitale Infrastructuur, Overzicht Vitale Processen.”
NCTV, Rollen en Verantwoordelijkheden
VPNGids.nl. 2023. “Minister Kuipers verklaart zorgsector als vitale infrastructuur.” https://VPNGids.nl.
Minister Kuipers verklaart zorgsector als vitale infrastructuur
Ministerie van Justitie en Veiligheid, Nationaal Cybersecurity Centrum. 2023. “Cybersecuritybleid Nederland.” ncsc.nl
Rijkswaterstaat (Ministerie van I&W). 2023. “Rapport Staat van de Infrastructuur Rijkswaterstaat.”
NRC. 2023. “Nederland en Duitsland bundelen hun landmacht. Defensiesamenwerking De bevelhebbers van de Nederlandse en de Duitse landmacht zijn eruit: de gevechtseenheden worden samengevoegd.” January 31.
NRC, Benjamin. 2022. “Mobiliteit. NS laat opnieuw minder treinen rijden, en het ov is voor velen nauwelijks meer een manier om op werk of school te komen.” NRC October 31.
Graph View
How committed is the government to fully decarbonizing the energy system by 2050?
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9
9
The government is clearly committed to transitioning to a decarbonized energy system.
8
7
6
7
6
The government is largely committed to transitioning to a decarbonized energy system.
5
4
3
4
3
The government is somewhat committed to transitioning to a decarbonized energy system.
2
1
1
The government is not at all committed to transitioning to a decarbonized energy system.
Looking at past policy performance through 2021 in the area of transitioning to a decarbonized energy system, the Netherlands is a laggard or a mid-tier player. Renewable energy accounted for 15% of total energy consumption in 2022. In 2021, it was 13%. Energy consumption per person in the Netherlands fell to 154 gigajoules in 2022, the lowest level since 1970. This is mainly because people consumed less gas due to the war in Ukraine.
The Netherlands was 77% dependent on energy from abroad in 2022. This percentage had not reached this level since the State Mines opened in Limburg in 1906. Energy consumption per capita was highest between 1995 and 2010, and has been declining since 2013 despite population growth as homes and cars became more fuel-efficient. Milder winters have also played a role. Especially after the Russian invasion of Ukraine, energy prices rose sharply. As a result, people consumed less energy for fear of high bills. Since then, energy prices have dropped significantly.
The transition to renewable energy has been an incremental one. Generally speaking, the intention is to use energy more economically; to shift from coal-generated electricity to solar and wind power; to shift from natural-gas-based heating systems to sustainable heat such as geothermal heat, residual heat and green hydrogen; to involve local residents by giving them the opportunity to participate in or co-own local energy projects; and to smartly integrate energy projects into the environment and landscape. The Netherlands generates renewable energy mainly via offshore wind turbines, wind turbines on land, and solar panels on roofs and in solar parks. In the future, technologies such as geothermal heat, residual heat and green hydrogen will be added. The government is also committed to the use of nuclear energy.
As part of its neoliberal policies, the central government encourages companies to invest in renewable energy production. The government also stimulates the use of sustainable energy by private individuals. For example, more and more homes are giving up the use of gas. The Dutch are also increasingly engaging in energy-saving measures and generating sustainable energy at home. There is a subsidy for individuals who want to generate sustainable energy using a heat pump or solar water heater. A national subsidy for solar panels is being phased out, but there are other financial programs in place.
For Minister of Energy and Climate Rob Jetten, just facilitating these market developments appeared too slow. He argued that companies were not making enough headway in the area of sustainability, which is why the government began becoming “more proactive than we have seen in decades.” Jetten presented the National Energy System Plan (NPE) in January 2023. This plan sketches the contours of the energy system of the future. It also discusses the path toward realizing this system, and how citizens, businesses, co-governments, state-owned companies, grid managers and other stakeholders can help shape the system.
The plan entails a vast monitoring system that includes:
- Annual monitoring: The House of Representatives is informed annually by the cabinet about the progress of the energy system and the realization of individual plan elements within the NPE.
- Annual energy memorandum. The Energy System Monitor and the Climate and Energy Foresight Exploration (KEV) are then used as inputs for the Energy Memorandum. In this document, the government assesses the progress made in the past year compared to the intended (interim) results looking toward 2050.
- Five-year review and update: The NPE will be updated in its entirety at least every five years. This is in line with the cycle laid down in the Climate Act for the adoption of the Climate Plan and the EU obligation to submit an integrated national energy and climate plan (INEK) to the European Commission.
Realizing such an integrated energy system will require new partnerships. A good example is the Regional Energy Strategies (RES) system. Within the context of the RES, governments work with the social partners, grid operators, business and, where possible, residents to develop regionally supported choices. Municipalities are tasked with making a democratically legitimized final decision. Of course, implementation risks are legion. Strong opposition is likely from carbon energy-dependent businesses and citizens unwilling to pay higher energy prices or who are resisting investments in energy-saving devices. Moreover, feasibility already proving to be a bottleneck, with long project lead times, lengthy decision-making processes, and disputes between public and private initiatives. Shortages of required technical personnel and the financing needed for the transition are added complications.
Citations:
Rijksoverheid. Nationaal Plan Energiesysteem definitief vastgesteld.
Nieuwsbericht | 01-12-2023
NRC, Chris Hensen and Erik van der Walle. 2023. “Bij de vergroening van het Nederlandse energiesysteem neemt de overheid een ongebruikelijk dominante rol in.” NRC, July 3.
CBS. 2023. “Hernieuwbare energie in Nederland 2022.” 12-10.
NOS Nieuws. 2023. “Energieverbruik per inwoner terug op niveau van 1970.” October 10.
van Dijk. 2023. “De overheid van Rob Jetten (D66) oogt repressief, regentesk en koud.” HP/De Tijd April 19.
NRC, Erik van der Walle. 2022. “Wijkverwarming Gemeenten willen zelf eigenaar zijn van warmtenetten, maar dat zien energiebedrijven niet zitten. De minister zoekt een uitweg.” September 28.
The Netherlands was 77% dependent on energy from abroad in 2022. This percentage had not reached this level since the State Mines opened in Limburg in 1906. Energy consumption per capita was highest between 1995 and 2010, and has been declining since 2013 despite population growth as homes and cars became more fuel-efficient. Milder winters have also played a role. Especially after the Russian invasion of Ukraine, energy prices rose sharply. As a result, people consumed less energy for fear of high bills. Since then, energy prices have dropped significantly.
The transition to renewable energy has been an incremental one. Generally speaking, the intention is to use energy more economically; to shift from coal-generated electricity to solar and wind power; to shift from natural-gas-based heating systems to sustainable heat such as geothermal heat, residual heat and green hydrogen; to involve local residents by giving them the opportunity to participate in or co-own local energy projects; and to smartly integrate energy projects into the environment and landscape. The Netherlands generates renewable energy mainly via offshore wind turbines, wind turbines on land, and solar panels on roofs and in solar parks. In the future, technologies such as geothermal heat, residual heat and green hydrogen will be added. The government is also committed to the use of nuclear energy.
As part of its neoliberal policies, the central government encourages companies to invest in renewable energy production. The government also stimulates the use of sustainable energy by private individuals. For example, more and more homes are giving up the use of gas. The Dutch are also increasingly engaging in energy-saving measures and generating sustainable energy at home. There is a subsidy for individuals who want to generate sustainable energy using a heat pump or solar water heater. A national subsidy for solar panels is being phased out, but there are other financial programs in place.
For Minister of Energy and Climate Rob Jetten, just facilitating these market developments appeared too slow. He argued that companies were not making enough headway in the area of sustainability, which is why the government began becoming “more proactive than we have seen in decades.” Jetten presented the National Energy System Plan (NPE) in January 2023. This plan sketches the contours of the energy system of the future. It also discusses the path toward realizing this system, and how citizens, businesses, co-governments, state-owned companies, grid managers and other stakeholders can help shape the system.
The plan entails a vast monitoring system that includes:
- Annual monitoring: The House of Representatives is informed annually by the cabinet about the progress of the energy system and the realization of individual plan elements within the NPE.
- Annual energy memorandum. The Energy System Monitor and the Climate and Energy Foresight Exploration (KEV) are then used as inputs for the Energy Memorandum. In this document, the government assesses the progress made in the past year compared to the intended (interim) results looking toward 2050.
- Five-year review and update: The NPE will be updated in its entirety at least every five years. This is in line with the cycle laid down in the Climate Act for the adoption of the Climate Plan and the EU obligation to submit an integrated national energy and climate plan (INEK) to the European Commission.
Realizing such an integrated energy system will require new partnerships. A good example is the Regional Energy Strategies (RES) system. Within the context of the RES, governments work with the social partners, grid operators, business and, where possible, residents to develop regionally supported choices. Municipalities are tasked with making a democratically legitimized final decision. Of course, implementation risks are legion. Strong opposition is likely from carbon energy-dependent businesses and citizens unwilling to pay higher energy prices or who are resisting investments in energy-saving devices. Moreover, feasibility already proving to be a bottleneck, with long project lead times, lengthy decision-making processes, and disputes between public and private initiatives. Shortages of required technical personnel and the financing needed for the transition are added complications.
Citations:
Rijksoverheid. Nationaal Plan Energiesysteem definitief vastgesteld.
Nieuwsbericht | 01-12-2023
NRC, Chris Hensen and Erik van der Walle. 2023. “Bij de vergroening van het Nederlandse energiesysteem neemt de overheid een ongebruikelijk dominante rol in.” NRC, July 3.
CBS. 2023. “Hernieuwbare energie in Nederland 2022.” 12-10.
NOS Nieuws. 2023. “Energieverbruik per inwoner terug op niveau van 1970.” October 10.
van Dijk. 2023. “De overheid van Rob Jetten (D66) oogt repressief, regentesk en koud.” HP/De Tijd April 19.
NRC, Erik van der Walle. 2022. “Wijkverwarming Gemeenten willen zelf eigenaar zijn van warmtenetten, maar dat zien energiebedrijven niet zitten. De minister zoekt een uitweg.” September 28.
Graph View
To what extent do existing labor market institutions support or hinder the transition to an adaptive labor market?
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9
Labor market institutions are fully aligned with the goal of an adaptable labor market.
8
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6
7
6
Labor market institutions are largely aligned with the goal of an adaptable labor market.
5
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3
Labor market institutions are only somewhat aligned with the goal of an adaptable labor market.
2
1
1
Labor market institutions are not at all aligned with the goal of an adaptable labor market.
By conventional standards, the Dutch labor market is doing fine. In late 2023, 73.1% of the 15- to 75-year-old population had a paid job; 5.4 million (56.7%) people were working on the basis of fixed contracts, 2.7 million (27.8%) had a flexible contract, and 1.2 million (12.4%) were self-employed. These data show that the Dutch labor market is two-tiered, in that it separates (typically relatively older) “insiders” with significant job security and (older and younger) “outsiders” who are often “independent workers” lacking unemployment protections and having little to no job security. The OECD considers the Netherlands to be an outlier in Europe in terms of work flexibilization. The overall unemployment rate stood at 3.7%, while the youth unemployment rate was 8.8%. Both figures ranked easily in the top 10 among the OECD countries. In 2022 – 2023, 38% of companies indicated that labor shortages were the main obstacle to more production or operations. According to the Central Bureau of Statistics, growing labor shortages are due to the aging of the workforce; a preference for part-time work, especially among women; fast economic growth since COVID-19 crisis due to the sustainability transition and a severe housing shortage; a disconnect between labor supply and demand in terms of occupation, education and skills; and increased work pressure resulting in more sick leave (at 5.6%, of workers taking leave the highest level ever measured).
In 2022, half a million part-timers indicated they would like to work more hours, and would be readily available to do so. Enabling part-timers to work more hours is therefore often considered an obvious way to reduce staff shortages. The Flexible Working Act (formerly the Working Hours Adjustment Act) already allows employees to ask the employer to allow them to work more or fewer hours. This act stipulates that the employer must grant the employee’s request unless compelling business or service interests oppose it.
Ever since the 2018 advice of the Borstlap Commission, the government has paid lip service to the importance of lifelong development. The Rutte III coalition agreement included the goal of achieving a breakthrough in the field of lifelong learning. The government launched some programs in addition to the instruments developed by the business community. A personal lifelong learning budget (PLLB) became part of all collective bargaining agreements. The Rutte IV cabinet continued this policy, creating a budget for training subsidies along with a scheme aimed at strengthening the learning culture in small and medium-sized enterprises. Unfortunately, monitoring and evaluation results of all these schemes show disappointing results.
Private employment agencies are not very helpful in realizing public goals like the shift from flexible to fixed-contract jobs, or from lower-skilled to the higher-skilled jobs needed for the sustainability transition. A 2020 Graydon study found that private employment agencies will facilitate job seekers’ preference for employability over job security. Job placement organizations are increasingly shifting toward segmentation, which allows them to specialize in specific markets or job groups. This impedes rather than facilitates worker mobility across firms, industries or economic sectors. An important manifestation of such segmentation in private employment agencies is the way they specialize in different types of labor immigration to help fight labor shortages. In 2019, job placement agencies handled almost 260,000 labor migrants from EU/EFTA countries (mostly Poles, Romanians and Bulgarians) for low-skilled jobs in logistics, horticulture and the food industry (like meat-packaging, etc.). The number of highly skilled expats has grown from 7,760 in 2014 to 26,000 in 2023. Partially attracted by significant tax benefits, these workers have come from India, China and the United States to make up for the lack of technically and scientifically trained workers in the microchip industry (ASML) and the pharmaceutical sector and at universities.
In mid-February 2023, the Dutch Labor Inspectorate published an investigation into the functioning of the work and income system. The main conclusion: Vulnerable job seekers receive insufficient support; priority is given mainly to those already within the labor market. Unfortunately, the conclusions drawn by the Labor Inspectorate are not at all new. The same conclusions were drawn in 2008.
Citations:
Algemene Bond Uitzendondernemingen. 2021. Arbeidsmigranten in Nederland: De Cijfers.
NRC. 2023. “1 op 3 expats na 7 jaar nog steeds in Nederland.” November 13.
CBS. 2022. “Arbeidsmarkt in cijfers 2022.” https://www.cbs.nl/nl-nl/visualisaties/dashboard-arbeidsmarkt/arbeidsmarkt-in-cijfers
CBS. 2023. “Werkloosheid in oktober iets gedaald.” 16 November.
Ecorys. 2022. Benutting individuele leer- en ontwikkelbudgetten. Eindrapport. Rotterdam: Ministerie van SZW.
Algemene Werkgeversvereniging NL. 2023. “STAP-budget in huidige vorm leidt onvoldoende op.” Brul, February 13.
Rekenkamer: Subsidie om de arbeidsmarkt te stimuleren werkt niet
BRON: REKENKAMER23 MEI 2023
Graydon Data Insights. 2020. “Arbeidsbemiddeling.”
Algemene Bond Uitzendondernemingen. “Zet werkzoekende meer centraal bij arbeidsbemiddeling.”
Artikel 06 maart 2023
In 2022, half a million part-timers indicated they would like to work more hours, and would be readily available to do so. Enabling part-timers to work more hours is therefore often considered an obvious way to reduce staff shortages. The Flexible Working Act (formerly the Working Hours Adjustment Act) already allows employees to ask the employer to allow them to work more or fewer hours. This act stipulates that the employer must grant the employee’s request unless compelling business or service interests oppose it.
Ever since the 2018 advice of the Borstlap Commission, the government has paid lip service to the importance of lifelong development. The Rutte III coalition agreement included the goal of achieving a breakthrough in the field of lifelong learning. The government launched some programs in addition to the instruments developed by the business community. A personal lifelong learning budget (PLLB) became part of all collective bargaining agreements. The Rutte IV cabinet continued this policy, creating a budget for training subsidies along with a scheme aimed at strengthening the learning culture in small and medium-sized enterprises. Unfortunately, monitoring and evaluation results of all these schemes show disappointing results.
Private employment agencies are not very helpful in realizing public goals like the shift from flexible to fixed-contract jobs, or from lower-skilled to the higher-skilled jobs needed for the sustainability transition. A 2020 Graydon study found that private employment agencies will facilitate job seekers’ preference for employability over job security. Job placement organizations are increasingly shifting toward segmentation, which allows them to specialize in specific markets or job groups. This impedes rather than facilitates worker mobility across firms, industries or economic sectors. An important manifestation of such segmentation in private employment agencies is the way they specialize in different types of labor immigration to help fight labor shortages. In 2019, job placement agencies handled almost 260,000 labor migrants from EU/EFTA countries (mostly Poles, Romanians and Bulgarians) for low-skilled jobs in logistics, horticulture and the food industry (like meat-packaging, etc.). The number of highly skilled expats has grown from 7,760 in 2014 to 26,000 in 2023. Partially attracted by significant tax benefits, these workers have come from India, China and the United States to make up for the lack of technically and scientifically trained workers in the microchip industry (ASML) and the pharmaceutical sector and at universities.
In mid-February 2023, the Dutch Labor Inspectorate published an investigation into the functioning of the work and income system. The main conclusion: Vulnerable job seekers receive insufficient support; priority is given mainly to those already within the labor market. Unfortunately, the conclusions drawn by the Labor Inspectorate are not at all new. The same conclusions were drawn in 2008.
Citations:
Algemene Bond Uitzendondernemingen. 2021. Arbeidsmigranten in Nederland: De Cijfers.
NRC. 2023. “1 op 3 expats na 7 jaar nog steeds in Nederland.” November 13.
CBS. 2022. “Arbeidsmarkt in cijfers 2022.” https://www.cbs.nl/nl-nl/visualisaties/dashboard-arbeidsmarkt/arbeidsmarkt-in-cijfers
CBS. 2023. “Werkloosheid in oktober iets gedaald.” 16 November.
Ecorys. 2022. Benutting individuele leer- en ontwikkelbudgetten. Eindrapport. Rotterdam: Ministerie van SZW.
Algemene Werkgeversvereniging NL. 2023. “STAP-budget in huidige vorm leidt onvoldoende op.” Brul, February 13.
Rekenkamer: Subsidie om de arbeidsmarkt te stimuleren werkt niet
BRON: REKENKAMER23 MEI 2023
Graydon Data Insights. 2020. “Arbeidsbemiddeling.”
Algemene Bond Uitzendondernemingen. “Zet werkzoekende meer centraal bij arbeidsbemiddeling.”
Artikel 06 maart 2023
To what extent do existing labor market institutions support or hinder the transition to an inclusive labor market?
10
9
9
Labor market institutions are fully aligned with the goal of an inclusive labor market.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of an inclusive labor market.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of an inclusive labor market.
2
1
1
Labor market institutions are not at all aligned with the goal of an inclusive labor market.
In a context of very low overall unemployment rates (between 3.5% and 3.8%) and significant labor shortages, the urgency of boosting inclusivity in the labor market is relatively less pronounced. As of 2021, 77.1% of women aged 15 to 65 not in school were employed, compared to 86.8% of in this category men. Both Dutch men and women ranked third in the EU in terms of net employment rates. While the average number of hours worked among women increased from nearly 27 hours per week in 2013 to 29.2 hours in 2021, the Netherlands continues to lead Europe with regard to part-time work. Nearly two in 10 employed men and almost seven out of 10 employed women had part-time jobs in 2021. Following the birth of a first child, many women opt to reduce their working hours, influenced partly by personal choice and partly by complex tax policies that make additional work less financially rewarding.
Over the past decade, the employment rate among young workers with a non-Western migration background (aged 15 to 25) has notably risen from 44% in 2011 to 59.5% in 2021, surpassing the growth among young people with a Dutch background. Notably, labor market participation rates increased significantly among young individuals with Turkish (58.9%) and Moroccan (76.7%) backgrounds. However, unemployment rates among young people with a migrant background remained higher in 2021 (15.4%) than was true among this group’s native Dutch counterparts (7.5%).
More generally, the labor market for people of all ages with a non-Western migration background is notably noninclusive. Recent research, based on sending 20,000 fictitious cover letters to existing job openings, suggests that labor market discrimination is structurally ingrained and increasing. Efforts to tackle such discriminatory practices through policy or legislation have been largely unsuccessful.
Regarding incentives and policies to encourage labor market entry or increased working hours, particularly for young people not in employment, education or training, the Dutch government has only weak measures in place. The government’s Early School Leave policy aims to: 1) reduce the annual number of school dropouts from 26,000 to a maximum of 18,000 by 2026; 2) assist early school leavers in returning to education; and 3) help young people in vulnerable positions transition to further education or find employment.
Currently, the government is developing new legislation to combat youth unemployment, focusing on providing adequate guidance and support to young people who have not successfully entered the labor market to achieve economic independence. This includes extending the Regional Notification and Coordination (RMC) function to young people aged 23 to 27 without initial qualifications, and enhancing career guidance in secondary vocational education (MBO levels 1 and 2) both during and after training.
Citations:
CBS. 2022. “Emancipatiemonitor 2022.” November 29.
Ministerie van OC&W. 2023. Voortgangsrapportage Emancipatie 2022-2023.
Rijksoverheid. n.d. “Aanpak voortijdig schoolverlaten.”
De Beleidsonderzoekers. 2021. “Evaluatie Wet flexibel werken.”
Onderzoek voor het Ministerie van SZW.
Kennisplatform Inclusief samenleven, De Winter-Koçak et al. January 2023. “De arbeidsmarktpositie van werkenden met een migratieachtergrond: wat is er tot nu toe bekend?”
Nederlands Jeugdinstituut. 2023. “Cijfers over jeugd met een migratieachtergrond.”
Lancee, B. 2021. “Ethnic Discrimination in Hiring: Comparing Groups Across Contexts. Results from a Cross-National Field Experiment.” Journal of Ethnic and Migration Studies 47 (6): 1181-1200.
Over the past decade, the employment rate among young workers with a non-Western migration background (aged 15 to 25) has notably risen from 44% in 2011 to 59.5% in 2021, surpassing the growth among young people with a Dutch background. Notably, labor market participation rates increased significantly among young individuals with Turkish (58.9%) and Moroccan (76.7%) backgrounds. However, unemployment rates among young people with a migrant background remained higher in 2021 (15.4%) than was true among this group’s native Dutch counterparts (7.5%).
More generally, the labor market for people of all ages with a non-Western migration background is notably noninclusive. Recent research, based on sending 20,000 fictitious cover letters to existing job openings, suggests that labor market discrimination is structurally ingrained and increasing. Efforts to tackle such discriminatory practices through policy or legislation have been largely unsuccessful.
Regarding incentives and policies to encourage labor market entry or increased working hours, particularly for young people not in employment, education or training, the Dutch government has only weak measures in place. The government’s Early School Leave policy aims to: 1) reduce the annual number of school dropouts from 26,000 to a maximum of 18,000 by 2026; 2) assist early school leavers in returning to education; and 3) help young people in vulnerable positions transition to further education or find employment.
Currently, the government is developing new legislation to combat youth unemployment, focusing on providing adequate guidance and support to young people who have not successfully entered the labor market to achieve economic independence. This includes extending the Regional Notification and Coordination (RMC) function to young people aged 23 to 27 without initial qualifications, and enhancing career guidance in secondary vocational education (MBO levels 1 and 2) both during and after training.
Citations:
CBS. 2022. “Emancipatiemonitor 2022.” November 29.
Ministerie van OC&W. 2023. Voortgangsrapportage Emancipatie 2022-2023.
Rijksoverheid. n.d. “Aanpak voortijdig schoolverlaten.”
De Beleidsonderzoekers. 2021. “Evaluatie Wet flexibel werken.”
Onderzoek voor het Ministerie van SZW.
Kennisplatform Inclusief samenleven, De Winter-Koçak et al. January 2023. “De arbeidsmarktpositie van werkenden met een migratieachtergrond: wat is er tot nu toe bekend?”
Nederlands Jeugdinstituut. 2023. “Cijfers over jeugd met een migratieachtergrond.”
Lancee, B. 2021. “Ethnic Discrimination in Hiring: Comparing Groups Across Contexts. Results from a Cross-National Field Experiment.” Journal of Ethnic and Migration Studies 47 (6): 1181-1200.
To what extent do existing labor market institutions support or hinder the mitigation of labor market risks?
10
9
9
Labor market institutions are fully aligned with the goal of protecting individuals against labor market risks.
8
7
6
7
6
Labor market institutions are largely aligned with the goal of protecting individuals against labor market risks.
5
4
3
4
3
Labor market institutions are only somewhat aligned with the goal of protecting individuals against labor market risks.
2
1
1
Labor market institutions are not at all aligned with the goal of protecting individuals against labor market risks.
Although government regulations systematically and automatically adjust the pension age based on increasing life expectancy, they only moderately mitigate labor market risks for groups such as those over 66 – 67 years old (depending on the birth year). In 2023, there were over 300,000 workers aged 65 or older (3.3% of all employed), many of whom were gainfully employed or self-employed, including artists, truck drivers and tailors. Although employment agencies offer placements for those over 50 or willing to work past 65, this population faces stubborn discriminatory biases from employers, labor unions (due to pension liabilities in collective labor agreements, CAOs) and the government, with concerns focusing on high wage costs versus perceived lower productivity and creativity. Starting 1 January 2024, the government is gradually phasing out the labor cost tax advantage for employers hiring older workers.
Studies indicate that young disabled individuals are at high risk of long-term financial hardship, particularly due to their vulnerable position in society. Research concludes that the current fragmented policies, relying on self-reliance, social network support and local government responsibilities for integrating state support systems are ineffective and inefficient.
Collective agreements negotiated by labor unions to protect workers’ rights regarding various working conditions still function effectively. However, union influence has weakened in recent years, with fewer than 20% of employees in some sectors remaining union members, and these memberships skewing toward older demographics. This situation means that a small minority of workers (e.g., among metalworkers or teachers) influence sector-wide employment terms. It also results in less representative consultation processes, often focusing on arrangements beneficial to older workers (see also “Effective Civil Society Organizations (Capital and Labor)”). This dynamic is supported by a quasi-contractual incorporation clause in collective bargaining agreements, making these agreements binding for all workers within a sector regardless of union membership.
Most employers accept the incorporation clause due to economies of scale with regard to transaction costs. However, in SMEs and certain sectors, there is a shift toward company-specific agreements in which works councils substitute for labor unions. If this trend persists, labor laws may need revision to enhance works councils’ rights, or to strengthen and institutionalize the legal basis of the incorporation clause.
The portability of social rights depends on international treaties and national conditions. Generally, state pensions (AOW), worker’s disability benefits (WAO), disability insurance for the self-employed (WAZ), benefits under the law on work and income (WIA), benefits under the law on surviving dependents (ANW), and sick leave benefits are unconditionally portable within the EU, EEA and Switzerland, with continued eligibility monitored in these countries. However, benefits like unemployment benefits (WW), surcharges on other benefits (Toeslagenwet) and benefits for disabled youth (Wajong) face portability restrictions unless individual arrangements are made with the relevant benefit agencies.
Citations:
NBA-platform voor accountants en financials, 25 August 2021. Steeds meer werkende 65-plussers.
Ministerie van Sociale Zaken en Werkgelegenheid. n.d. “Arboportaal. Ouderen en werk.”
tax live.nl, Wolters Kluwer, 21 December 2023. Gevolgen stapsgewijze afschaffing loonkostenvoordeel oudere werknemers.
Nationale Ombudsman. 2022. Meedoen zonder beperkingen. De financiële problemen van jongeren met een beperking in de Wajong en Participatiewet. Rapportnummer: 2022/144.
Rijksoverheid. n.d. “Werken met een arbeidsbeperking.”
NRC. 2023. “Vakbonden hebben opnieuw minder leden, maar stakingsacties remmen daling.” Marée, October 31.
Eén Vandaag. 2023. “Waarom aantal leden van vakbond niet uitmaakt bij onderhandelingen, maar hoe representatief ze zijn wél.” January 23.
Rijksoverheid. n.d. “Welke uitkeringen kan ik meenemen als ik ga emigreren?” https://www.rijksoverheid.nl/onderwerpen/emigreren/vraag-en-antwoord/uitkeringen-meenemen-naar-het-buitenland
Studies indicate that young disabled individuals are at high risk of long-term financial hardship, particularly due to their vulnerable position in society. Research concludes that the current fragmented policies, relying on self-reliance, social network support and local government responsibilities for integrating state support systems are ineffective and inefficient.
Collective agreements negotiated by labor unions to protect workers’ rights regarding various working conditions still function effectively. However, union influence has weakened in recent years, with fewer than 20% of employees in some sectors remaining union members, and these memberships skewing toward older demographics. This situation means that a small minority of workers (e.g., among metalworkers or teachers) influence sector-wide employment terms. It also results in less representative consultation processes, often focusing on arrangements beneficial to older workers (see also “Effective Civil Society Organizations (Capital and Labor)”). This dynamic is supported by a quasi-contractual incorporation clause in collective bargaining agreements, making these agreements binding for all workers within a sector regardless of union membership.
Most employers accept the incorporation clause due to economies of scale with regard to transaction costs. However, in SMEs and certain sectors, there is a shift toward company-specific agreements in which works councils substitute for labor unions. If this trend persists, labor laws may need revision to enhance works councils’ rights, or to strengthen and institutionalize the legal basis of the incorporation clause.
The portability of social rights depends on international treaties and national conditions. Generally, state pensions (AOW), worker’s disability benefits (WAO), disability insurance for the self-employed (WAZ), benefits under the law on work and income (WIA), benefits under the law on surviving dependents (ANW), and sick leave benefits are unconditionally portable within the EU, EEA and Switzerland, with continued eligibility monitored in these countries. However, benefits like unemployment benefits (WW), surcharges on other benefits (Toeslagenwet) and benefits for disabled youth (Wajong) face portability restrictions unless individual arrangements are made with the relevant benefit agencies.
Citations:
NBA-platform voor accountants en financials, 25 August 2021. Steeds meer werkende 65-plussers.
Ministerie van Sociale Zaken en Werkgelegenheid. n.d. “Arboportaal. Ouderen en werk.”
tax live.nl, Wolters Kluwer, 21 December 2023. Gevolgen stapsgewijze afschaffing loonkostenvoordeel oudere werknemers.
Nationale Ombudsman. 2022. Meedoen zonder beperkingen. De financiële problemen van jongeren met een beperking in de Wajong en Participatiewet. Rapportnummer: 2022/144.
Rijksoverheid. n.d. “Werken met een arbeidsbeperking.”
NRC. 2023. “Vakbonden hebben opnieuw minder leden, maar stakingsacties remmen daling.” Marée, October 31.
Eén Vandaag. 2023. “Waarom aantal leden van vakbond niet uitmaakt bij onderhandelingen, maar hoe representatief ze zijn wél.” January 23.
Rijksoverheid. n.d. “Welke uitkeringen kan ik meenemen als ik ga emigreren?” https://www.rijksoverheid.nl/onderwerpen/emigreren/vraag-en-antwoord/uitkeringen-meenemen-naar-het-buitenland
Graph View
To what extent do existing tax institutions and procedures support or hinder adequate tax revenue flows?
10
9
9
The tax system is fully aligned with the goals of ensuring adequate tax revenues.
8
7
6
7
6
The tax system is largely aligned with the goals of ensuring adequate tax revenues.
5
4
3
4
3
The tax system is only somewhat aligned with the goals of ensuring adequate tax revenues.
2
1
1
The tax system is not at all aligned with the goals of ensuring adequate tax revenues.
In a brief promotional clip, the Tax Service (Belastingdienst, BD) identifies its mission as “bringing in money for The Netherlands Ltd.,” aiming for digital transactions where possible and engaging in personal interactions when necessary. However, the clip also highlights a disconnect: Although 78% of Dutch citizens shop online and 83% use online banking services, the BD primarily communicates with its millions of clients via through postal letters. This massive operation involves 25,000 civil servants out of the 110,000 employed by the national government, handling 20 million queries, 1 million refunds, 500,000 objections and 200,000 office visits annually. Despite these challenges, tax collection itself appears on the surface to function well.
Nonetheless, the BD faces significant challenges. Once considered to be one of the most advanced tax authorities globally, it now operates on outdated computer systems and is struggling with overdue maintenance of critical ICT infrastructure. These issues jeopardize future tax collection, prompting the government to postpone necessary tax policy updates until after 2026. Compounding these problems are structural staff shortages resulting from an ill-conceived early pension scheme, which has further hampered citizen services.
Recent disclosures revealed that the BD categorizes implementation and compliance risks as “high” across five tax categories, collectively generating nearly €100 billion in revenue, a quarter of the state’s income in 2023. The BD’s ability to uphold complex tax laws has been compromised over the years, exacerbated by its dual role in tax collection and the administration of various supplements, allowances and refunds.
Taxation in the Netherlands is intricate and opaque. Income policies rely not only on tax rates and brackets but also on credits, benefits tailored to household situations and incomes, and a labyrinth of exemptions, deductions and adjustments. Adjusting allowances and supplements is technically simpler than creating new subsidies, which requires legislative changes and more time. This complexity burdens both taxpayers and tax administrators alike. For taxpayers, this complexity sometimes results in a “poverty trap,” where accepting paid work or a slight increase in income can lead to a net loss due to reduced allowances or exemptions. The infamous child benefit scandal, which eroded trust in Dutch governance, directly stemmed from these complexities and a strong focus on fraud detection.
ICT failures have also compromised legal standards. Algorithms used for benefit calculations and fraud detection were found to discriminate against non-Dutch households. Despite warnings, the BD proceeded with the use of potentially discriminatory algorithms, prioritizing organizational interests over legal compliance and fundamental rights. Political pressures from the Ministry of Finance further obstructed transparency in tax policies, leaving citizens and businesses unaware of updated interpretations of tax laws, potentially resulting in overpaid taxes.
Citations:
Belastingdienst. 2022. “Vernieuwen dienstverlening en toezicht.”
NRC, Stokmans, and Vermeulen. 2023. “Belastingdienst ziet ‘hoge risico’s’ bij het innen van 100 miljard euro aan belasting.” NRC July 12.
Ziesemer. 2023. “Waarom het maar niet lukt om ons belastingstelsel makkelijker te maken.” De Correspondent September 14.
Nu.nl. 2023. “ICT-problemen bij de Belastingdienst duren al zeker achttien jaar.” March 4.
Deijkers, J., and Van Wensen, H. 2023. “Door ICT-problemen Belastingdienst dreigt een nieuwe fiscale ramp.” Elseviers Weekblad November 8.
“`Davidson, David, and Sebastiaan Brommersma. 2023. “Belastingdienst blijft wet overtreden met mogelijk discriminerende fraude-algoritmen.” Follow the Money December 14.“`
NRC, Jeroen Wester. 2023. “Martijn Nouwen | wetenschapper. Financiën hield openbaarmaking van belastingbeleid tegen, ‘dit leidt tot rechtsongelijkheid’.” NRC March 28.
NRC, Derk Stokmans Stefan Vermeulen. 2023. “Staatssecretaris Marnix van Rij over de hervormingen bij de Belastingdienst: ‘Ik vind het veel te lang duren’.” March 22.
Nonetheless, the BD faces significant challenges. Once considered to be one of the most advanced tax authorities globally, it now operates on outdated computer systems and is struggling with overdue maintenance of critical ICT infrastructure. These issues jeopardize future tax collection, prompting the government to postpone necessary tax policy updates until after 2026. Compounding these problems are structural staff shortages resulting from an ill-conceived early pension scheme, which has further hampered citizen services.
Recent disclosures revealed that the BD categorizes implementation and compliance risks as “high” across five tax categories, collectively generating nearly €100 billion in revenue, a quarter of the state’s income in 2023. The BD’s ability to uphold complex tax laws has been compromised over the years, exacerbated by its dual role in tax collection and the administration of various supplements, allowances and refunds.
Taxation in the Netherlands is intricate and opaque. Income policies rely not only on tax rates and brackets but also on credits, benefits tailored to household situations and incomes, and a labyrinth of exemptions, deductions and adjustments. Adjusting allowances and supplements is technically simpler than creating new subsidies, which requires legislative changes and more time. This complexity burdens both taxpayers and tax administrators alike. For taxpayers, this complexity sometimes results in a “poverty trap,” where accepting paid work or a slight increase in income can lead to a net loss due to reduced allowances or exemptions. The infamous child benefit scandal, which eroded trust in Dutch governance, directly stemmed from these complexities and a strong focus on fraud detection.
ICT failures have also compromised legal standards. Algorithms used for benefit calculations and fraud detection were found to discriminate against non-Dutch households. Despite warnings, the BD proceeded with the use of potentially discriminatory algorithms, prioritizing organizational interests over legal compliance and fundamental rights. Political pressures from the Ministry of Finance further obstructed transparency in tax policies, leaving citizens and businesses unaware of updated interpretations of tax laws, potentially resulting in overpaid taxes.
Citations:
Belastingdienst. 2022. “Vernieuwen dienstverlening en toezicht.”
NRC, Stokmans, and Vermeulen. 2023. “Belastingdienst ziet ‘hoge risico’s’ bij het innen van 100 miljard euro aan belasting.” NRC July 12.
Ziesemer. 2023. “Waarom het maar niet lukt om ons belastingstelsel makkelijker te maken.” De Correspondent September 14.
Nu.nl. 2023. “ICT-problemen bij de Belastingdienst duren al zeker achttien jaar.” March 4.
Deijkers, J., and Van Wensen, H. 2023. “Door ICT-problemen Belastingdienst dreigt een nieuwe fiscale ramp.” Elseviers Weekblad November 8.
“`Davidson, David, and Sebastiaan Brommersma. 2023. “Belastingdienst blijft wet overtreden met mogelijk discriminerende fraude-algoritmen.” Follow the Money December 14.“`
NRC, Jeroen Wester. 2023. “Martijn Nouwen | wetenschapper. Financiën hield openbaarmaking van belastingbeleid tegen, ‘dit leidt tot rechtsongelijkheid’.” NRC March 28.
NRC, Derk Stokmans Stefan Vermeulen. 2023. “Staatssecretaris Marnix van Rij over de hervormingen bij de Belastingdienst: ‘Ik vind het veel te lang duren’.” March 22.
To what extent do existing tax institutions and procedures consider equity aspects?
10
9
9
The tax system is fully aligned with the goal of ensuring equity.
8
7
6
7
6
The tax system is largely aligned with the goal of ensuring equity.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of ensuring equity.
2
1
1
The tax system is not at all aligned with the goal of ensuring equity.
Regarding horizontal equity, income taxation adheres to a principle of progressivity (“draagkrachtbeginsel”). However, concerning vertical equity, the overall outcome of the system is regressive, though less visibly so. Pre-tax incomes and benefits have become more unequal, but government tax policies have effectively adjusted them to achieve greater equality in outcomes. The Gini index for net incomes, adjusted for household size, sits just below the European average of 0.3 and has remained stable for the past two decades. In contrast, the Gini index for wealth has consistently hovered around a high 0.8 for decades.
The crux of the issue lies in the differential treatment of capital and labor within the tax system. Labor income is subject to progressive taxation, while income from shares and investments is subject to regressive taxes. This segmented tax structure has widened the gap between the wealthiest and middle-to-lower income groups. Despite corporations generating about 68% of labor- and consumption-related tax revenues, they contribute only 10% to total state revenues. This disparity primarily stems from the contrasting tax treatments of labor and capital. Consequently, 61% of wealth is concentrated among the wealthiest 10% of households, leaving 25% of households in net debt.
Recently, the Senate approved a “tax reform” package aimed at modestly enhancing vertical tax equity within the existing framework. Notably, the system used to treat labor and investment income differently remains unchanged. However, implementation faces delays until 2026 or later due to operational challenges and issues within the BD, despite a judiciary directive to reform the investment income system promptly.
Citations:
Hoppe, et al. 2021. Taxes. STI.
Rijksoverheid. 2023. “Belangrijkste belastingwijzigingen per 1 januari 2024.” https://www.rijksoverheid.nl.
Open Overheid.nl. 2022. “Interdepartementaal Beleidsonderzoek, 1 July. Licht uit, spot aan: de vermogensverdeling.”
Platform O, Soons. 2023. “Herverdeel vermogen om bestaanszekerheid te verhogen.” March 14.
The crux of the issue lies in the differential treatment of capital and labor within the tax system. Labor income is subject to progressive taxation, while income from shares and investments is subject to regressive taxes. This segmented tax structure has widened the gap between the wealthiest and middle-to-lower income groups. Despite corporations generating about 68% of labor- and consumption-related tax revenues, they contribute only 10% to total state revenues. This disparity primarily stems from the contrasting tax treatments of labor and capital. Consequently, 61% of wealth is concentrated among the wealthiest 10% of households, leaving 25% of households in net debt.
Recently, the Senate approved a “tax reform” package aimed at modestly enhancing vertical tax equity within the existing framework. Notably, the system used to treat labor and investment income differently remains unchanged. However, implementation faces delays until 2026 or later due to operational challenges and issues within the BD, despite a judiciary directive to reform the investment income system promptly.
Citations:
Hoppe, et al. 2021. Taxes. STI.
Rijksoverheid. 2023. “Belangrijkste belastingwijzigingen per 1 januari 2024.” https://www.rijksoverheid.nl.
Open Overheid.nl. 2022. “Interdepartementaal Beleidsonderzoek, 1 July. Licht uit, spot aan: de vermogensverdeling.”
Platform O, Soons. 2023. “Herverdeel vermogen om bestaanszekerheid te verhogen.” March 14.
To what extent do existing tax institutions and procedures minimize compliance and collection costs?
10
9
9
The tax system is fully aligned with the goal of minimizing compliance and collection costs.
8
7
6
7
6
The tax system is largely aligned with the goal of minimizing compliance and collection costs.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of minimizing compliance and collection costs.
2
1
1
The tax system is not at all aligned with the goal of minimizing compliance and collection costs.
The Tax Office (Belastingdienst, BD) provides extensive information to taxpayers, but most deductions must be personally filed in order to receive a tax refund. Organizations like the Consumer Association and the Association of Homeowners regularly offer tips for filing tax returns. Given the complexity of the Dutch tax system, it is little surprise that there is a thriving industry of advisers – from sole practitioners to large firms – offering tax consultancy services. “Belastingadviseur-wijzers” assist individuals and small businesses in navigating different advisory options and corresponding rates, which started at €60 in 2023 but can vary widely based on personal or business circumstances. Appeals incur court fees starting at €50, rising to €184 for appeals involving dividend or sales tax.
Because tax policy and interpretations have not been well communicated, individuals, businesses and consultants may have based recent tax returns on outdated rules, potentially resulting in overpayment of taxes.
Moreover, the BD could be more supportive. For instance, while any online shopping service can accept payments via PayPal or iDEAL, the BD has yet to implement this functionality, citing excessive new legislation and the need to maintain existing laws.
Fifteen years ago, the Dutch BD was among the world’s most advanced tax authorities, known for its slogan: “We can’t make it more fun…”. Today, it is struggling to simplify an overly complex system. State Secretary Marnix van Rij (CDA), who was responsible for tax reforms under the Rutte IV government, aimed to “reduce the number of tax schemes by evaluating them every five years” and “abolish, cut back or adjust negatively evaluated schemes.” However, eliminating outdated regulations often proves more challenging than introducing new ones. For example, when the Court of Auditors recommended reviewing the agricultural exemption regulation in 2021, it lacked political support. The finance minister of the time remarked that the Court’s recommendations ran up against “the law of political gravity” in the parliament.
Errors in allowance settlements and other mistakes result in significant litigation costs. Following a Supreme Court ruling, hundreds of BD employees are rectifying levy payments wrongly imposed on assets, addressing some 310,000 objections. Similarly, hundreds of officials are working to compensate parents affected by the child benefit scandal. These “recovery cases” impact the BD’s ability to handle routine tasks, as outlined in its 2023 annual plan.
Citations:
Klaver. 2022. “Belastingen: makkelijker kunnen we het maar niet maken.” De Correspondent, October 5.
Rijksoverheid. 2022. “Nieuw box 3 stelsel op basis van werkelijk (ipv fictief) rendement naar 2026 (o.g.v. uitspraak van de Hoge Raad. lid december 2021).”
NRC, Stokmans and Vermeulen. 2023. “Staatssecretaris Marnix van Rij over de hervormingen bij de Belastingdienst:’Ik vind het veel te lang duren.’” NRC March 22.
NRC. 2023. “Martijn Nouwen | wetenschapper Financiën hield openbaarmaking van belastingbeleid tegen, ‘dit leidt tot rechtsongelijkheid’.” March 28.
Ziesemer. 2023. “Waarom het maar niet lukt om ons belastingstelsel makkelijker te maken.” De Correspondent September 14.
Because tax policy and interpretations have not been well communicated, individuals, businesses and consultants may have based recent tax returns on outdated rules, potentially resulting in overpayment of taxes.
Moreover, the BD could be more supportive. For instance, while any online shopping service can accept payments via PayPal or iDEAL, the BD has yet to implement this functionality, citing excessive new legislation and the need to maintain existing laws.
Fifteen years ago, the Dutch BD was among the world’s most advanced tax authorities, known for its slogan: “We can’t make it more fun…”. Today, it is struggling to simplify an overly complex system. State Secretary Marnix van Rij (CDA), who was responsible for tax reforms under the Rutte IV government, aimed to “reduce the number of tax schemes by evaluating them every five years” and “abolish, cut back or adjust negatively evaluated schemes.” However, eliminating outdated regulations often proves more challenging than introducing new ones. For example, when the Court of Auditors recommended reviewing the agricultural exemption regulation in 2021, it lacked political support. The finance minister of the time remarked that the Court’s recommendations ran up against “the law of political gravity” in the parliament.
Errors in allowance settlements and other mistakes result in significant litigation costs. Following a Supreme Court ruling, hundreds of BD employees are rectifying levy payments wrongly imposed on assets, addressing some 310,000 objections. Similarly, hundreds of officials are working to compensate parents affected by the child benefit scandal. These “recovery cases” impact the BD’s ability to handle routine tasks, as outlined in its 2023 annual plan.
Citations:
Klaver. 2022. “Belastingen: makkelijker kunnen we het maar niet maken.” De Correspondent, October 5.
Rijksoverheid. 2022. “Nieuw box 3 stelsel op basis van werkelijk (ipv fictief) rendement naar 2026 (o.g.v. uitspraak van de Hoge Raad. lid december 2021).”
NRC, Stokmans and Vermeulen. 2023. “Staatssecretaris Marnix van Rij over de hervormingen bij de Belastingdienst:’Ik vind het veel te lang duren.’” NRC March 22.
NRC. 2023. “Martijn Nouwen | wetenschapper Financiën hield openbaarmaking van belastingbeleid tegen, ‘dit leidt tot rechtsongelijkheid’.” March 28.
Ziesemer. 2023. “Waarom het maar niet lukt om ons belastingstelsel makkelijker te maken.” De Correspondent September 14.
To what extent do existing tax institutions and procedures internalize negative and positive externalities?
10
9
9
The tax system is fully aligned with the goal of internalizing externalities.
8
7
6
7
6
The tax system is largely aligned with the goal of internalizing externalities.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of internalizing externalities.
2
1
1
The tax system is not at all aligned with the goal of internalizing externalities.
Under the terms of the 2019 Dutch Climate Accords – a “triumph for poldering” – large companies will face a carbon tax while also receiving subsidies to adopt cleaner practices using green hydrogen. Furthermore, they will be permitted to capture and store greenhouse gases in seabeds. Coal-fired power plants, scheduled to close by 2030, will receive “green” subsidies to facilitate the transition to greener technologies. By that year, thanks to new wind turbines and solar panels, 75% of Dutch electricity is expected to be sourced from renewable sources.
In terms of internalizing positive and negative externalities, the government adopts a balanced approach that differs from the conventional economic wisdom preferred by most experts. Rather than relying solely on punitive measures such as carbon taxes and regulatory levies, the government also incentivizes companies to adopt greener technologies through subsidies. This approach reflects a broader struggle between two policy paradigms: that of traditional neoclassical economists on the one hand, who advocate for correcting market failures through negative incentives like taxes and regulatory levies, and that of transition thinkers on the other, influenced by so-called science, technology and society (STS) theories. These latter thinkers argue that market-failure theory alone is not sufficient, and that addressing complexities, dependencies and uncertainties requires a more proactive role from government as a guiding force and coordinator (cf. Mazzucato), as exemplified by Dutch policymakers in various contexts (see e.g., “Circular Economy” and “Effective Climate Action”). Under this paradigm, successful ecological transitions also necessitate positive incentives such as “green” subsidies and tax exemptions for corporations, as well as nudging strategies aimed at citizens.
Citations:
extinction rebellion.nl. 2022. “Opinie fossielesubsidie.” https://extinctionrebellion.nl
Me Judice, den Butter. 2023. “Vervang fossiele subsidies door regulerende heffingen.” 6 November.
Me Judice, Metten. 2023. “Belastingvoordelen voor fossiele brandstoffen nog groter.” 23 March.
Bolhuis. 2023. “Beleidseconomen moeten weten wat transitiefalen is.” Economisch Statistische Berichten November 30.
PBL and CPB, Brink et al. 2023. “Afschaffing fossiele energiesubsidies: eerder een hersenkraker dan een no-brainer.”
PBL. 2023. “Afschaffen fossiele subsidies vooral nuttig als het energietransitie stimuleert.” 21 October.
In terms of internalizing positive and negative externalities, the government adopts a balanced approach that differs from the conventional economic wisdom preferred by most experts. Rather than relying solely on punitive measures such as carbon taxes and regulatory levies, the government also incentivizes companies to adopt greener technologies through subsidies. This approach reflects a broader struggle between two policy paradigms: that of traditional neoclassical economists on the one hand, who advocate for correcting market failures through negative incentives like taxes and regulatory levies, and that of transition thinkers on the other, influenced by so-called science, technology and society (STS) theories. These latter thinkers argue that market-failure theory alone is not sufficient, and that addressing complexities, dependencies and uncertainties requires a more proactive role from government as a guiding force and coordinator (cf. Mazzucato), as exemplified by Dutch policymakers in various contexts (see e.g., “Circular Economy” and “Effective Climate Action”). Under this paradigm, successful ecological transitions also necessitate positive incentives such as “green” subsidies and tax exemptions for corporations, as well as nudging strategies aimed at citizens.
Citations:
extinction rebellion.nl. 2022. “Opinie fossielesubsidie.” https://extinctionrebellion.nl
Me Judice, den Butter. 2023. “Vervang fossiele subsidies door regulerende heffingen.” 6 November.
Me Judice, Metten. 2023. “Belastingvoordelen voor fossiele brandstoffen nog groter.” 23 March.
Bolhuis. 2023. “Beleidseconomen moeten weten wat transitiefalen is.” Economisch Statistische Berichten November 30.
PBL and CPB, Brink et al. 2023. “Afschaffing fossiele energiesubsidies: eerder een hersenkraker dan een no-brainer.”
PBL. 2023. “Afschaffen fossiele subsidies vooral nuttig als het energietransitie stimuleert.” 21 October.
Graph View
To what extent do existing budgetary institutions and procedures support or hinder sustainable budgeting?
10
9
9
Budgetary institutions and policies are fully aligned with the goals of sustainable budgeting.
8
7
6
7
6
Budgetary institutions and policies are largely aligned with the goals of sustainable budgeting.
5
4
3
4
3
Budgetary institutions and policies are only somewhat aligned with the goals of sustainable budgeting.
2
1
1
Budgetary institutions and policies are not at all aligned with the goals of sustainable budgeting.
Governmental budgeting is an officially rule-based, standardized, year-long and complex process that involves processing numerous formal statements and account documents. Even members of parliament require specialization, and have begun to complain that they can no longer easily access the most relevant data and policy choices.
In addition to this complexity, the past few years, which have included the COVID-19 pandemic and external events in 2022 such as the war in Ukraine, energy price shocks and asylum crises, have prompted rapid “emergency” responses with significant budgetary consequences. These responses (40 in 2020, 59 in 2021, 34 in 2022) are legitimized by an escape clause in the Comptroller Act, Article 2.27, which allows ministers discretionary power with only retrospective parliamentary approval by appealing to the “national interest.”
Moreover, expert views on “sound public budgeting” have evolved considerably in recent years. Under the new thinking: 1) a budget deficit no longer automatically implies austerity policies; 2) budgetary policy can and should be used to positively impact economic growth; and 3) governments can react promptly and decisively during a crisis.
Another recent development is the publication of a Broad Prosperity and Sustainable Development Goals Monitor on the third Wednesday of May (Accountability Day), following consultations between the cabinet, the House of Representatives and the Central Statistical Service (CBS). Efforts are currently underway to integrate the Broad Prosperity Monitor into the regular budget and policy cycle. Experiments with so-called fact sheets are linking key components of departmental budgets with relevant indicators from the Broad Prosperity Monitor and indirectly with the Sustainable Development Goals. These are intended as “growth documents,” with the aim of further adapting the set of indicators in the future.
As a consequence of this new budgetary approach, the government has established several special funds outside the regular budget, albeit somewhat constrained by a public investment threshold. These include the Corona Support Fund, the Ukraine Fund, the Climate and Transition Fund, the Nitrogen Fund, the National Growth Fund, the House Building Fund, the Infrastructure Fund for the Northern Provinces (as compensation for the gas crisis), the Mobility Fund, the Defense Equipment Fund and the Delta Fund. Prioritizing long-term public investments has meant the state has less financial reserve against future financial risks; the CPB projected a public debt of 28% of GDP by 2060 without targeted public investments, but said debt levels would reach 92% with such investments. Another risk concerns the possible erosion of parliamentary budget rights. From a democratic and public accountability perspective, the General Accountability Office (Algemene Rekenkamer) has warned since 2016 that an ever-larger share of nationally collected taxes (fully two-thirds in 2019) is spent with minimal parliamentary budgetary oversight. The Council of State (Raad van State) is increasingly concerned about this problematic situation.
Despite these growing concerns, in September 2022, the Rutte IV government initially committed to a substantial increase in spending for special projects, including the implementation of a price ceiling to limit the effects of sudden increases in energy expenses for most citizens. This was dependent on the presence of very favorable economic conditions, especially a very low interest rate on government loans. However, by April 2023, the minister of finance was already calling for caution, if not a return to austerity measures.
Citations:
NRC. 2022. “Waar gaat het geld naartoe? Overal, om de crises van Nederland te bezweren.” NRC September 20.
Ministerie van Financiën. “(Visuele) samenvatting miljoenennota 2024.” https://www.rijksoverheid.nl/ministeries/ministerie-van-financien/documenten/rapporten/2024/09/19/visuele-samenvatting-miljoenennota-2024
NRC. 2023. “Sigrid Kaag: ‘We moeten gewoon weer binnen onze marges gaan leven’.” Rik Rutten, April 28.
Tweede Kamer. 2023. Het Grote Begrotingsboek voor Kamerleden (2de duk). 22 November.
CBS.nl. 2023. “Factsheets Brede Welvaart bij de begroting van de ministeries. Oplegger Factsheets Brede Welvaart & SDG’s.”
Van Dijk, J.H. 2023. “Hoe het denken over begrotingsbeleid veranderde.” Me Judice, January 30.
P. Omtzigt. 2023. “Thorbecke lezing.” Zwolle, April 14.
NRC. 2023. “Rekenkamer: miljarden niet goed verantwoord, VWS blijft probleemgeval.” May 17.
J. van Dijk and V. Ziesemer. 2023. De begrotingsopgave. Eem kwantitatief advies voor het begrotingsbeleid van het toekomstige kabinet. Instituut voor Politieke Economie.
In addition to this complexity, the past few years, which have included the COVID-19 pandemic and external events in 2022 such as the war in Ukraine, energy price shocks and asylum crises, have prompted rapid “emergency” responses with significant budgetary consequences. These responses (40 in 2020, 59 in 2021, 34 in 2022) are legitimized by an escape clause in the Comptroller Act, Article 2.27, which allows ministers discretionary power with only retrospective parliamentary approval by appealing to the “national interest.”
Moreover, expert views on “sound public budgeting” have evolved considerably in recent years. Under the new thinking: 1) a budget deficit no longer automatically implies austerity policies; 2) budgetary policy can and should be used to positively impact economic growth; and 3) governments can react promptly and decisively during a crisis.
Another recent development is the publication of a Broad Prosperity and Sustainable Development Goals Monitor on the third Wednesday of May (Accountability Day), following consultations between the cabinet, the House of Representatives and the Central Statistical Service (CBS). Efforts are currently underway to integrate the Broad Prosperity Monitor into the regular budget and policy cycle. Experiments with so-called fact sheets are linking key components of departmental budgets with relevant indicators from the Broad Prosperity Monitor and indirectly with the Sustainable Development Goals. These are intended as “growth documents,” with the aim of further adapting the set of indicators in the future.
As a consequence of this new budgetary approach, the government has established several special funds outside the regular budget, albeit somewhat constrained by a public investment threshold. These include the Corona Support Fund, the Ukraine Fund, the Climate and Transition Fund, the Nitrogen Fund, the National Growth Fund, the House Building Fund, the Infrastructure Fund for the Northern Provinces (as compensation for the gas crisis), the Mobility Fund, the Defense Equipment Fund and the Delta Fund. Prioritizing long-term public investments has meant the state has less financial reserve against future financial risks; the CPB projected a public debt of 28% of GDP by 2060 without targeted public investments, but said debt levels would reach 92% with such investments. Another risk concerns the possible erosion of parliamentary budget rights. From a democratic and public accountability perspective, the General Accountability Office (Algemene Rekenkamer) has warned since 2016 that an ever-larger share of nationally collected taxes (fully two-thirds in 2019) is spent with minimal parliamentary budgetary oversight. The Council of State (Raad van State) is increasingly concerned about this problematic situation.
Despite these growing concerns, in September 2022, the Rutte IV government initially committed to a substantial increase in spending for special projects, including the implementation of a price ceiling to limit the effects of sudden increases in energy expenses for most citizens. This was dependent on the presence of very favorable economic conditions, especially a very low interest rate on government loans. However, by April 2023, the minister of finance was already calling for caution, if not a return to austerity measures.
Citations:
NRC. 2022. “Waar gaat het geld naartoe? Overal, om de crises van Nederland te bezweren.” NRC September 20.
Ministerie van Financiën. “(Visuele) samenvatting miljoenennota 2024.” https://www.rijksoverheid.nl/ministeries/ministerie-van-financien/documenten/rapporten/2024/09/19/visuele-samenvatting-miljoenennota-2024
NRC. 2023. “Sigrid Kaag: ‘We moeten gewoon weer binnen onze marges gaan leven’.” Rik Rutten, April 28.
Tweede Kamer. 2023. Het Grote Begrotingsboek voor Kamerleden (2de duk). 22 November.
CBS.nl. 2023. “Factsheets Brede Welvaart bij de begroting van de ministeries. Oplegger Factsheets Brede Welvaart & SDG’s.”
Van Dijk, J.H. 2023. “Hoe het denken over begrotingsbeleid veranderde.” Me Judice, January 30.
P. Omtzigt. 2023. “Thorbecke lezing.” Zwolle, April 14.
NRC. 2023. “Rekenkamer: miljarden niet goed verantwoord, VWS blijft probleemgeval.” May 17.
J. van Dijk and V. Ziesemer. 2023. De begrotingsopgave. Eem kwantitatief advies voor het begrotingsbeleid van het toekomstige kabinet. Instituut voor Politieke Economie.
Graph View
How committed is the government to utilizing research and innovation as drivers for the transition to a sustainable economy and society?
10
9
9
The government is clearly committed to utilizing research and innovation as drivers for the transition to a sustainable economy and society.
8
7
6
7
6
The government is largely committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
5
4
3
4
3
The government is somewhat committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
2
1
1
The government is not at all committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
Regarding the overall knowledge infrastructure, the Netherlands stands out as a leading performer, ranking fourth among 133 countries in the Global Knowledge Index 2023 (GKI) and fourth among the 61 countries with very high human development. Strengths highlighted in the GKI include youth engagement in education and training, individual internet activities, government expenditure on vocational education, insolvency recovery rates and the number of secure internet servers per million people.
In terms of Research and Innovation (R&I), as defined narrowly, the 2023 EU Innovation Scoreboard identifies Denmark as the new top innovator, with Sweden, Finland, the Netherlands and Belgium also among the innovation leaders. The Netherlands’ performance, while slightly above the average of these leaders, also shows a rate of increase that is marginally higher than the EU average (8.5 percentage points). The country’s performance lead over the EU is thus becoming larger. The country excels in areas such as public-private co-publications, foreign doctoral students, lifelong learning opportunities, international scientific collaborations and citizens with advanced digital skills. However, it is weaker in the areas of non-R&D innovation expenditures, sales of innovative products, exports of medium- and high-tech goods, environmental technologies, and the number of doctoral graduates.
Dutch investment in R&D has significantly increased, from half a billion euros in 1964 to €19.5 billion in 2021. However, the overall share has remained between 1.64% and 2.31% of GDP for over five decades. Despite aiming to meet the EU’s Lisbon Treaty target of 3% of GDP, achieving this would require a leap of +0.7% of GDP. In fact, neither public nor private investments in R&I are likely to rise by this level. Public spending on R&D as a percentage of GDP has stagnated at about 0.63% to 0.70% despite nominal increases, reflecting the fact that economic growth has outpaced R&D spending growth. Similarly, business investment in R&D in the Netherlands, which is below the OECD average of 1.75%, is not expected to increase substantially, despite significant government fiscal incentive programs.
Challenges in increasing R&D expenditure are rooted in the Dutch economic structure, where sectors like ICT/software, high tech, automotive and pharmaceuticals are R&D-intensive, but others such as oil and gas, trade, hospitality and construction dominate. This mix strongly influences private R&D investment levels, with the Netherlands having comparatively low representation in three of the four most R&D-intensive sectors. Among the R&D-intensive sectors, the Netherlands has the greatest presence in high tech, with companies like Philips, ASML and NXP.
The aspiration of reaching R&D expenditure totaling 3% of GDP cannot be realized through incremental funding increases alone. Instead, a knowledge and innovation covenant aims to foster collaboration among government, businesses and knowledge institutions on five core missions: energy transition, circular economy, agriculture-water-food, health and care, and safety. This initiative involves ministries, interprovincial consultation bodies and private sector partners like Invest NL and regional development agencies (ROMs). The budget overview consists of a long list of promised contributions by the ministries, knowledge institutes (like TNO, Deltares, NLR), applied universities, and the public-private investment “vehicles.” All in all, this is not a focused push to increase public R&D spending to 3% of GDP, but a haphazard cobbling-together of existing initiatives with already approved budgets.
Citations:
Rathenau Instituut. 2023. “Op naar drie procent.”
Topsectoren.nl. n.d. “Missies voor de toekomst.”
Gezamenlijke KIC partners. November 2023. Kennis- en Innovatieconvenant 2024-2027. Publicatie-nr. 1023-085.
Invest NL. 2023. “Terigblik 2023: bredere rol als Nationale Financierings- en Ontwikkelingsinstelling.” December 20.
In terms of Research and Innovation (R&I), as defined narrowly, the 2023 EU Innovation Scoreboard identifies Denmark as the new top innovator, with Sweden, Finland, the Netherlands and Belgium also among the innovation leaders. The Netherlands’ performance, while slightly above the average of these leaders, also shows a rate of increase that is marginally higher than the EU average (8.5 percentage points). The country’s performance lead over the EU is thus becoming larger. The country excels in areas such as public-private co-publications, foreign doctoral students, lifelong learning opportunities, international scientific collaborations and citizens with advanced digital skills. However, it is weaker in the areas of non-R&D innovation expenditures, sales of innovative products, exports of medium- and high-tech goods, environmental technologies, and the number of doctoral graduates.
Dutch investment in R&D has significantly increased, from half a billion euros in 1964 to €19.5 billion in 2021. However, the overall share has remained between 1.64% and 2.31% of GDP for over five decades. Despite aiming to meet the EU’s Lisbon Treaty target of 3% of GDP, achieving this would require a leap of +0.7% of GDP. In fact, neither public nor private investments in R&I are likely to rise by this level. Public spending on R&D as a percentage of GDP has stagnated at about 0.63% to 0.70% despite nominal increases, reflecting the fact that economic growth has outpaced R&D spending growth. Similarly, business investment in R&D in the Netherlands, which is below the OECD average of 1.75%, is not expected to increase substantially, despite significant government fiscal incentive programs.
Challenges in increasing R&D expenditure are rooted in the Dutch economic structure, where sectors like ICT/software, high tech, automotive and pharmaceuticals are R&D-intensive, but others such as oil and gas, trade, hospitality and construction dominate. This mix strongly influences private R&D investment levels, with the Netherlands having comparatively low representation in three of the four most R&D-intensive sectors. Among the R&D-intensive sectors, the Netherlands has the greatest presence in high tech, with companies like Philips, ASML and NXP.
The aspiration of reaching R&D expenditure totaling 3% of GDP cannot be realized through incremental funding increases alone. Instead, a knowledge and innovation covenant aims to foster collaboration among government, businesses and knowledge institutions on five core missions: energy transition, circular economy, agriculture-water-food, health and care, and safety. This initiative involves ministries, interprovincial consultation bodies and private sector partners like Invest NL and regional development agencies (ROMs). The budget overview consists of a long list of promised contributions by the ministries, knowledge institutes (like TNO, Deltares, NLR), applied universities, and the public-private investment “vehicles.” All in all, this is not a focused push to increase public R&D spending to 3% of GDP, but a haphazard cobbling-together of existing initiatives with already approved budgets.
Citations:
Rathenau Instituut. 2023. “Op naar drie procent.”
Topsectoren.nl. n.d. “Missies voor de toekomst.”
Gezamenlijke KIC partners. November 2023. Kennis- en Innovatieconvenant 2024-2027. Publicatie-nr. 1023-085.
Invest NL. 2023. “Terigblik 2023: bredere rol als Nationale Financierings- en Ontwikkelingsinstelling.” December 20.
Graph View
How committed and credible is the government in its activities to guide the effective regulation and supervision of the international financial architecture?
10
9
9
The government is clearly committed to ensuring the stability of the global financial system.
8
7
6
7
6
The government is largely committed to ensuring the stability of the global financial system.
5
4
3
4
3
The government is somewhat committed to ensuring the stability of the global financial system.
2
1
1
The government is not at all committed to ensuring the stability of the global financial system.
Previously a staunch advocate of a multilateral approach to international relations, even in the face of difficult economic and strategic challenges, Dutch foreign policy remains formally committed to ensuring that international financial institutions maintain sufficient capitalization to uphold global financial and economic stability. Financial and foreign policies also prioritize establishing a resilient trade and investment system geared toward sustaining a level playing field, economic resilience, open markets, and transitions to a digitized and sustainable economy.
However, the country’s commitment to a multilateral global system upheld by multilateral treaties is no longer unconditional. The Royal Speech from the Throne 2023 stateed: “In international trade policy, the cabinet is also working to build economic resilience and reduce unwanted strategic dependencies.” This significantly qualifies the Netherlands’ continued formal commitments to global and multilateral financial systems. Increasingly, the Netherlands is looking to NATO and the EU to achieve its global objectives. However, following Prime Minister Rutte’s departure, a more eurosceptic voice from the Netherlands is gaining traction in Brussels. Among the four parties that secured seats in the November 2023 elections, only GroenLinks-PvdA remains pro-European. Wilders has called for a referendum on a Nexit, NSC leader Omtzigt wants a national referendum on EU accession by new countries, and the BBB wants to renegotiate the Netherlands’ opt-out position on migration and environmental policies.
Compounding this ambivalence is the response to EU calls to address the Netherlands’ reputation as an international tax haven and improve tax information transparency. The EU’s Tax Observatory has found that the Netherlands plays a crucial role as the world’s largest transit country for capital seeking tax avoidance. The wealthiest Dutch citizens are able to reduce their tax burdens on income and wealth significantly compared to billionaires in France or the United States (Global Tax Freedom Report 2024, figure 4, p. 12), resulting in an annual revenue loss of €22 billion for other countries due to these tax policies.
Despite some positive reception from the European Parliament regarding Dutch tax reforms, both domestic (as discussed under “Sustainable Taxation”) and international transparency issues persist. For instance, foreign companies negotiate undisclosed tax agreements with the Tax Service. Efforts to address tax evasion have only gained urgency due to data leaks (Panama Papers, Paradise Papers, Pandora Papers, Uber Files) and robust investigative journalism.
Citations:
Brands, Aïda. 2022. “Europees Parlement onverwacht positief over Nederlandse belastinghervormingen.” NOS Nieuws, October 13.
EUTax Observatory. 2024. “Global Tax Freedom Report.”
Kysia Hekster. 27 November. “Winst Wilders is wake-upcall voor EU en slecht nieuws voor ambities Rutte.” NOS Nieuws.
Brussels Peil, van Slooten, 19 November 2023. En dan de inhoud. Het gaat er niet over.
NRC. 2023. “Opinie Roel Janssen. De fiscus ondermijnt zelf het Nederlands belastingstelsel.” October 27.
Initiatiefnota van de leden Nijboer en Van der Lee over de aanpak van Nederland als belastingparadijs. 2022–2023. TK, Vergaderjaar, 16.273.
Ministerie van Buitenlandse Zaken. 2023. Beleidskader Mondiaal Multilateralisme.
Positionering van het Koninkrijk in een veranderende multilaterale wereldorde
DNB Bulletin. 2023. “Nederland gevoelig voor verbrokkeling van internationale handelssysteem.” December 8.
However, the country’s commitment to a multilateral global system upheld by multilateral treaties is no longer unconditional. The Royal Speech from the Throne 2023 stateed: “In international trade policy, the cabinet is also working to build economic resilience and reduce unwanted strategic dependencies.” This significantly qualifies the Netherlands’ continued formal commitments to global and multilateral financial systems. Increasingly, the Netherlands is looking to NATO and the EU to achieve its global objectives. However, following Prime Minister Rutte’s departure, a more eurosceptic voice from the Netherlands is gaining traction in Brussels. Among the four parties that secured seats in the November 2023 elections, only GroenLinks-PvdA remains pro-European. Wilders has called for a referendum on a Nexit, NSC leader Omtzigt wants a national referendum on EU accession by new countries, and the BBB wants to renegotiate the Netherlands’ opt-out position on migration and environmental policies.
Compounding this ambivalence is the response to EU calls to address the Netherlands’ reputation as an international tax haven and improve tax information transparency. The EU’s Tax Observatory has found that the Netherlands plays a crucial role as the world’s largest transit country for capital seeking tax avoidance. The wealthiest Dutch citizens are able to reduce their tax burdens on income and wealth significantly compared to billionaires in France or the United States (Global Tax Freedom Report 2024, figure 4, p. 12), resulting in an annual revenue loss of €22 billion for other countries due to these tax policies.
Despite some positive reception from the European Parliament regarding Dutch tax reforms, both domestic (as discussed under “Sustainable Taxation”) and international transparency issues persist. For instance, foreign companies negotiate undisclosed tax agreements with the Tax Service. Efforts to address tax evasion have only gained urgency due to data leaks (Panama Papers, Paradise Papers, Pandora Papers, Uber Files) and robust investigative journalism.
Citations:
Brands, Aïda. 2022. “Europees Parlement onverwacht positief over Nederlandse belastinghervormingen.” NOS Nieuws, October 13.
EUTax Observatory. 2024. “Global Tax Freedom Report.”
Kysia Hekster. 27 November. “Winst Wilders is wake-upcall voor EU en slecht nieuws voor ambities Rutte.” NOS Nieuws.
Brussels Peil, van Slooten, 19 November 2023. En dan de inhoud. Het gaat er niet over.
NRC. 2023. “Opinie Roel Janssen. De fiscus ondermijnt zelf het Nederlands belastingstelsel.” October 27.
Initiatiefnota van de leden Nijboer en Van der Lee over de aanpak van Nederland als belastingparadijs. 2022–2023. TK, Vergaderjaar, 16.273.
Ministerie van Buitenlandse Zaken. 2023. Beleidskader Mondiaal Multilateralisme.
Positionering van het Koninkrijk in een veranderende multilaterale wereldorde
DNB Bulletin. 2023. “Nederland gevoelig voor verbrokkeling van internationale handelssysteem.” December 8.