CEO Survey: concerns about the Dutch business climate

27/02/24

The PwC CEO Survey shows that Dutch CEOs are concerned about the variability of tax regulations which have a significant impact on companies' future developments. Edwin Visser, head of tax policy at PwC, recognises that picture. "Although the Dutch tax system is fundamentally solid, we also see too much complexity in certain rules. In addition, in our opinion, the tax system contains too many random and isolated legislative initiatives, which sometimes violates the coherence within the system. To ensure that the tax environment stimulates investment and economic growth, it is important that politicians make informed choices and ensure consistent policies."

This calls for an open and constructive dialogue between policymakers, the business community and tax advisors, with the aim of creating a fiscal climate that stimulates innovation and makes the Netherlands attractive to businesses.

The results of the recent PwC CEO Survey shed light on the growing concern among Dutch CEOs about the complexity and changeable nature of tax regulations. Over 55 per cent of the board chairs surveyed indicate that regulations will have a significant impact on their companies' future developments. And 40 per cent of them say they would consider leaving the Netherlands at some point.

VNO-NCW and MKB-Nederland have seen investment decline for some time now, and expressed their concerns in a letter to the House of Representatives last month. Falling investments are putting increasing pressure on our (future) earning capacity and the business organisations point to the importance of a good business and investment climate to turn the tide.

The Dutch investment climate has a number of strong points, including in the fiscal area, although the Netherlands no longer ranks in the top ten. See the International Tax Competitive Ranking by the Tax Foundation. Despite these strong points, Visser believes there are significant areas for improvement within the current system. The CEO Survey points out, among other things, a need for more stability and predictability in tax legislation. Frequent and unpredictable changes make it difficult for companies to make long-term planning and investment decisions. Studies from other organisations, such as the Monitor Ondernemingsklimaat by SEO and ACBI, reach similar conclusions.

Visser is concerned about the political pressure to scale back the innovation box and the abolition of the share buy-back facility and the 30% expatrule that were adopted in the frenzy of last year's tax plan debate, without a proper impact analysis. Additionally, he believes that by the introduction of the minimum tax (Pillar 2), international corporate tax rules could be simplified. Do we still need anti-hybrid rules or CFC rules after the introduction of the minimum tax? To what extent does an earnings-stripping provision still serve its purpose? This should urgently be put on the agenda by the Netherlands in the OECD's Committee on Fiscal Affairs and the EU's High Level Working Party on Taxation.

Major issues are the coherence within the tax system as such and the lack of focus on tax measures that stimulate economic growth and competitiveness. The Netherlands faces significant challenges and substantial funds, both public and private, are needed for the net-zero transformation. It is vital that there is more clarity on the objectives of the system and how it works in broad terms.

What does this mean for your organisation?

As an organisation subject to the Dutch tax system, you probably also have to deal with these aspects. It is essential that politicians commit to making well-considered choices that respect the core values of the Dutch tax system and ensure consistent policies for the long term. Both public and private parties have a responsibility here. The recently published report 'Bouwstenen voor een beter en eenvoudiger belastingstelsel', prepared by an official working group, also endorses that a good business climate benefits from a stable and predictable tax climate, where rates and bases do not deviate too much internationally. The report also indicates that taxation can serve to address societal challenges. According to Visser, it is also gratifying that the report indicates that fiscal policy should adhere to a number of principles of good tax policy. Despite the direction the report provides, reform will require political courage and perseverance.

PwC advocates a dialogue between policymakers, the business community and tax advisors to achieve a tax system that not only meets today's requirements, but is also robust and flexible enough to meet tomorrow's challenges. By working together, we can create an environment that promotes investment and innovation, stimulates economic growth and positions the Netherlands as an attractive location for both national and international businesses and talented workers.