Private sector bonuses to be taxed through a new levy

Generous rewards face a cap

THE HAGUE — Information provided by Dutch Junior Finance Minister, staatssecretaris, Jan Kees de Jager suggests that the government is planning to tax large bonuses in the private sector. The extremely generous bonuses are a thorn in the flesh of particularly Labour (PvdA) and other left of centre parties which placed the issue on the political agenda in the Netherlands. The taxation of the bonuses replaces the original idea to abolish the deductibility of pension premiums from annual incomes of over 185,000 euros.

De Jager revealed he wants a tax of "around 20 to 30 percent" which companies would have to pay on bonuses for executives. Although he did not specify the income threshold at which the levy would apply, it is though that the ceiling will be higher than the so-called 'Balkenende norm,' the premier’s annual salary of around 185,000 euros.

The First Chamber, which scrutinizes and must endorse Second Chamber legislation, approved the levy concept, after weary Christian Democrats were given guarantees that the pension premium deductibility plans would be dropped.

Definitive plans to tackle excessive top incomes through the levy are still a few months away. De Jager is also contemplating measures against the frequent practice of giving employees significant salary increases shortly before they go on pension, so that their pension benefits are pumped up much higher, at the expense of the system. Another issue raised by left of centre parties is the way remuneration works for pension fund managers. Currently, the system allows them a de facto stake in the funds under their control.