Annemarie van Gaal thinks swapping benefits for a better tax deal will get people back to work and simplify an overcomplicated tax system.

When Hans de Boer got the top job at employers’ organisation VNO-NCW he said the Netherlands had the potential to become the richest country in the world. Perhaps that is the case, but only if everyone does their bit and that will only happen if work actually pays. Many people on benefits don’t want to work because everything they earn is deducted from their benefits. They will not be better off by getting a job.

De Boer proposed a cut in the tax rate to 35% for incomes up to €100,000 and to 45% for anything over that. That means a shift of €18bn from the treasury into people’s pocket books. That will benefit competitiveness, national spending and job growth. He was pounced upon immediately: De Boer had failed to mention where the €18bn was going to come from.

Aid

Let me make some suggestions. First off, let’s change the budget for development aid from gifts to micro credits for local entrepreneurs. Development aid as it stands is not very effective. Micro credits ensure the money is returned while at the same time contributing to shaping the necessary middle class in a developing country. And it means savings of €4.7bn.

Then we put the embassies of several countries in one location and organise more embassy-related matters online. It’s perfectly feasible and leaves us with a couple of hundred million euros in the kitty.

Benefits

But where the really big savings can be made is with an exchange of a low tax rate for the abolishment of all types of benefits. Child care benefits, for example, are no longer relevant (€3.5bn).

Health care benefits don’t work. The €5.1bn budget is meant to pay towards the premiums but hundreds of thousands of families are spending the money on other things and are then insured at the expense of society anyway. Chuck in a couple more complicated benefit schemes and there you have it: €18bn

People on good incomes have no problem with the tax/benefit swap. People on benefits do because they need the extra income. But there is a solution. Suppose we exempt the first €5,000 of people’s earnings from taxes so that even people on benefits can keep the first €5,000 without any repercussions.

In this way anyone can work and contribute to society for a couple of hours a week and earn the money they would get in health, housing and child benefits themselves. Those who are incapable of doing that will be the exceptions to the rule.

We wanted a less complicated tax system, didn’t we? Here it is. Top marks to De Boer.

Annemarie van Gaal is an entrepreneur and investor