October 23, 2020

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The BIK: a place for business or a gift to large companies?

The BIK: a place for business or a gift to large companies?

Tomorrow the cabinet will work out a controversial tax rebate for companies. The so-called Job-Related Investment Discount (BIK) was one of the biggest surprises on Prinsjesdag.

The left opposition had no words to reject the new regulation. It would be a parting present for the farewell foreman Hans de Boer. On the contrary, the cabinet calls it a decisive regulation for continuing to invest in the crisis. The big question remains: what exactly does the BIK contain?

Further information on this must therefore be provided tomorrow. Because apart from the fact that 2 billion euros are planned, little is known about the details of the plan. “Details of the system are being worked out further,” wrote the cabinet in a message accompanying the tax plan.

There is already something to be said about the idea behind the tax credit. Due to the corona crisis, investments in the business world have declined, which is why the cabinet wants to increase the investment flow with the BIK again. Investment is needed to stimulate the economy and, according to the cabinet, to create jobs.

“When companies make an investment, for example the purchase of a new machine, they receive a discount that they can deduct from wage tax,” writes the cabinet.

Doomsday scenario

Much of the criticism of the measure focuses on the risk of repeating mistakes made previously. Because in the 1980s the Netherlands also had a subsidy for investment through taxes. Then a lot went wrong.

In the calculations for the Budget Memorandum, the Central Planning Bureau warned against falling into the same pitfalls that were being made at the time of the Investment Account Act: “The WIR was abolished in 1988 for excessive misuse.”

Since there were hardly any criteria, the investment program worked like a syrup pot for hungry flies. Investors collected money for real estate projects and even municipalities were able to find a subsidy pot for the purchase of a new fire engine through intelligent constructions.

The total cost: around 50 billion guilders in ten years and a headache for successive finance ministers. “It was a budget disaster,” recalls former Finance Minister Onno Ruding. “Everyone agreed on the abolition.”