Billionaires in the Netherlands pay less tax in proportion to their income than they do in either the US or France, according to new research from the EU Tax Observatory.

The agency’s new Global Tax Evasion Report 2024 outlines areas where action has been taken to fight against tax evasion. For example, the report says, the introduction of an automatic exchange of bank information between countries has led to a sharp decline in offshore tax evasion by individuals since 2016.

However, there has been a lack of efforts so far to address the considerable tax deficit of billionaires. 

“In countries where we have data, we see that billionaires pay much less taxes than ordinary citizens in proportion to their income,” the report said. This is particularly the case in the Netherlands, where people on low incomes pay an effective tax rate of above 40%. The richest 5% of the country pay well below that in tax and billionaires, of whom there are 45 in the Netherlands, pay less than 20%. 

They do this, according to economist Gabriel Zucman, primarily by using shell companies to avoid income tax. Instead of earnings dividends and interest themselves, they earn it through shell companies, free of individual income tax, said Zucman, who is one of the compilers of the report. 

The best way to tackle this issue is through a minimum tax expressed as a fraction of wealth, Zucman said. “Hence our main proposal: A 2% global minimum tax on billionaires.” 

The report also looks at the impact of preferential tax regimes for high-income foreign workers in a number of European countries – such as the 30% ruling in the Netherlands. 

It found that the Dutch, Belgian and British regimes are the most popular with 92,000, 45,000, and 28,000 beneficiaries, respectively, although the figures date from 2021 and are now lower in the Netherlands.

The report says in 2020, the 30% ruling cost the Dutch state €1.1 billion and benefited individuals to the tune of nearly €12,000 each – but this is a far lower figure than many other EU countries.

The report also gives the Dutch scheme a score of five out of 10 when it comes to its harmful effects. 

Specific group

The 30% ruling makes it possible for expats with specific expertise and salary levels to pay no tax on 30% of their income for a maximum of five years. Dutch nationals who have lived abroad for more than 25 years are also eligible to make a claim. 

To benefit, you must be recruited from abroad and you must have lived a distance of more than 150 km from the Dutch border for more than 16 months out of the 24 months prior to your first working day in the Netherlands.

You also have to meet strict salary guidelines, earning at least €41,954 in 2023 or €31,891 if you have completed a master’s degree and are younger than 30 years old. There is no minimum salary for scientific researchers or people working in scientific education and the scheme is widely used by universities and colleges. 

The outgoing government has decided to cap the maximum benefit in 2024 after earlier reducing the time the 30% ruling can be claimed from eight to five years. This latest move will impact high earning employees with an income of at least €223,000 in 2024.

Election

However, several political parties have indicated they wish to reduce the benefits of the ruling still further after the November general election, in particular Pieter Omtzigt, founder of new party NSC.

He said during a debate on Sunday night that “the expats run the [housing] market in Amsterdam.”

“They get 30% [of their income] tax free. This means they have more money available and can pay more,” he said. “I will almost abolish it.”