How big business keeps Dutch politicians in line
In the last few months, a number of multinationals headquartered in the Netherlands have threatened to move abroad. They’re scared—or are pretending they’re scared—that the new government will make it hard to hire foreign workers.
This will never happen. After decades of neoliberal leadership, the Netherlands has become a profoundly market-oriented state. Meaning that the state will, generally speaking, do what business it wants to do.
This market orientation is a far more powerful force in the Netherlands than anti-immigrant sentiment will ever be. As political maneuverings in the last month have made clear, bending over backwards to create a “friendly business environment” can easily win out over ensuring social welfare.
This is dangerous; it’s the kind of thing that drives people to the far right.
To understand what’s happened recently, you have to understand how much immigration dominated last November’s elections. Everyone agreed that our little country was becoming overcrowded, and all parties proposed limiting immigration in different ways. Immigrants were categorized: expats, international students, labor migrants, and asylum seekers. The latter was the hottest topic.
Wilders called for an impossible “asylum stop”; other parties proposed more realistic solutions. A month before the election, Pieter Omtzigt, leader of the center-right NSC party, proposed a slight reduction to the expat tax benefit, which keeps expats from paying taxes on the first 30% of their income for five years.
And when I say a slight reduction, I mean slight! The proposal was not to cancel the tax break. Just reduce it a little—to 30% for the first 20 months, 20% for the next 20, and 10% for the last.
This would have generated 200 million euros in savings a year. This money would have gone to reduce the interest rate on student loans for the “unlucky generation” - a group of students fucked over by a rate increase.
Omtzigt’s bill passed the lower house. It now has an uncertain future.
Big business, also mad about schemes to increase taxes on banks and share buybacks, threw a fit. They need tax breaks to compete with other countries! They need to attract talent! They need to compete! This fit has snowballed in the months since, and it’s no surprise that post-election the immigration conversation has shifted from the least economically valuable immigrants to the most.
Earlier this month, the Telegraaf reported that ten publicly-listed companies are considering moving abroad, including ASML, the largest Dutch company by market cap and the biggest tech company in Europe. There’s a “good chance” Unilever will list its $18 billion ice cream unit (that’s what it’s called!) in Amsterdam rather than London this year. But, as the CEO said (threatened?) last weekend, “predictable government and regulations are very important.”
Van Oord, the largest ship owner in the Netherlands and the builder of Palm Island in Dubai, is expanding to that city in part due to the “unlimited labor market with a lot of talent.” When dredging company Boskalis announced its move to the UAE, their CEO referenced Omtzigt’s proposal specifically:
The fact that we are now building a regional head office in Abu Dhabi has to do with the intention of a majority in the House of Representatives to limit the access of foreign knowledge workers to the Netherlands and a labor market shortage of technical personnel in particular. We have a window there on the whole of Asia, with an endless supply of talent. In Abu Dhabi we can get staff visas within a few weeks, in the Netherlands it will take two years, if we succeed at all.
“Limiting access” is a stretch, but in any case the Dutch government is scrambling. Outgoing Prime Minister Mark Rutte set up a task force (called “Project Beethoven”) to keep ASML in the Netherlands, and last week the government announced plans to meet ASML’s demands and spend a jaw-dropping 2.5 billion euros to improve infrastructure in Eindhoven around their headquarters. And the mood in parliament about expats has “changed considerably,” as EenVandaag reported last week: the majority in parliament want to keep the tax scheme as is, and it looks like they will not push Omtzigt’s bill forward into law.
Expat tax benefits are unfair to Dutch people. This is true whether or not tax breaks are necessary for businesses to attract talent. A highly skilled Dutch person working the same job for the same salary as an expat makes effectively less money because they pay more taxes.
Full disclosure: I took advantage of the 30% ruling for the full five years. It would have been irrational for me, or anyone, not to. You can use the benefit and acknowledge that the scheme is essentially unfair at the same time.
The expat tax benefit costs the government 850 million euros a year. This kind of government subsidy for business is inevitable: once dependent on business, you'll do whatever it takes to keep it around.
Why doesn’t the burden fall on businesses to pay foreign workers salaries high enough to attract them? Because it doesn’t have to. The government does it for them.
Business conditions will always be better somewhere else. Dubai, or wherever, will always be out there with open arms, bigger subsidies, and laxer immigration laws. There will always be consultants pushing multinationals to move headquarters to cut costs—forgetting that workers, including executives, might prefer to live amongst the tulip fields.
You can’t even blame multinationals from pushing so hard for subsidies. It’s rational. It might also seem rational for the Dutch government to hand them whatever they want to make them stay, but this is short term thinking. It misses the long-term social consequences.
What’s disturbing to me about this whole affair is that everyone has forgotten about the “unlucky generation” of Dutch students who Omtzigt proposed to help. Similarly, taxing banks and share buybacks was a Labor/Green Party initiative to help low-income households. No one is talking about them, either.
The government doesn’t always do what business wants. Sometimes social welfare triumphs, if those affected organize in cohesive groups and amass political power. We’ve seen this recently with farmers and environmentalists.
Farmers angry about nitrogen policy and EU regulations blocked the highways with tractors, joined forces in the BBB farmer’s party, won a big election, and the government backed way off. After many days of Extinction Rebellion’s highway blockades raising awareness about fossil fuel subsidies, the government announced plans to phase them out.
Huge multinationals like Unilever and ASML don’t have to organize. They breathe in the direction of Dubai or France and we throw billions of euros their way. Students, highly skilled Dutch workers, and low income families do not have this kind of power.
People sense this. They don’t have to follow the ins and outs I’ve written about here to sense an atmosphere of unfairness, that the playing field is not equal, or that people at the top aren’t paying their fair share. It might seem rational to do whatever it takes to keep big business here. But when this happens repeatedly at the cost of social welfare people will be driven to the political fringes. They will search for a leader, usually a populist just like Geert Wilders, who understands and speaks to the inequality they sense.
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