On 28 September 2021 the IMF issued a report on the Netherlands economy following consultations under Article IV of the IMF’s articles of agreement.

The report notes that the Netherlands economy suffered a relatively small recession in the pandemic in 2020; and has recovered strongly in 2021. Economic growth for 2021 is projected to be 3.8% with strengthening domestic demand. Growth is expected to remain strong in 2022 at 3.2%, and then gradually ease to a medium-term rate of around 1.5%. There are still short-term risks from unforeseen developments in the pandemic.

With the strengthening recovery, the government’s support measures are now targeted at sectors that are still affected by the pandemic, although broader support programs could be brought back if necessary. The expanded loan guarantee program is still in place and additional time is allowed for the repayment of tax debts.

Forward-looking policies that could help the economy return to normal functioning include helping to move production to expanding industries; implementing the new law to facilitate debt restructuring for companies in difficulty; and efficient restructuring and insolvency procedures, to help reallocate capital to viable businesses.

Support for investment can help growth in the medium term. Government support for research and development (R&D) could increase investment in technology; and establishment of a credit bureau could improve funding for SMEs, thereby helping their investment activity.

In the labour market the self-employed and workers with flexible contracts are vulnerable to job and income losses. Appropriate social protection should be ensured, including mandatory disability insurance for the self-employed which has already been proposed. Tax and other incentives should be realigned across different types of employment and employment protection for workers in flexible contracts can be improved. Employing more workers on a permanent basis would incentivize employers and employees to improve productivity by investing in training.

The government already has ambitious plans in relation to the environment. The goal of reducing greenhouse gas emissions by 49% and 95% by 2030 and 2050 respectively, relative to 1990 levels, is being supported by a range of measures to achieve the objectives.

Further possibilities to build on current policies could include feebates or other instruments to back up carbon pricing across all the sectors targeted in the 2019 Climate Agreement. The government could consider imposing surcharges on CO2 emissions in the power sector and phasing out taxes on the residential and industrial use of electricity.

The reforms to international and capital taxation currently under discussion are moving in a positive direction. The use of special financial institutions for tax planning is being examined closely and proposals for reform would tighten the rules. The proposals include a cross-border conditional withholding tax and changes to the double tax treaty policy.

A reform to Box 3 of the individual tax return, so that the actual returns are taxed rather than a notional amount, would help to achieve more equitable taxation across different assets, including more fairness in the relative treatment of renters and homeowners.