A report by the economic research bureau SEO has found that cutting the 30 percent tax ruling could damage the Dutch economy by reducing the number of highly-skilled workers coming to take up jobs in the Netherlands. 

Cutting 30 percent ruling will reduce number of highly-skilled migrants

The tax break, which allows a select group of highly-skilled workers who move to the Netherlands for work to claim the first 30 percent of their income as tax-free within their first five years of residency, was capped by the Dutch government in 2023. 

An independent review by economic research bureau SEO found that the 30 percent ruling is both effective and efficient, and has contributed to the Dutch economy, but that now the tax break has been watered down, the country will likely suffer from a drop in the number of highly skilled migrants coming to the Netherlands to take up key jobs. 

New tax break has more costly administration for the government

Ironically, the report also found that the new system, which allows expat workers 20 months' wages with a 30 percent tax-free allowance, 20 months at 20 percent and 20 months at 10 percent, is actually much more costly to administer.  “A higher percentage attracts a larger number of highly skilled migrants, improving the business climate and making a positive contribution to the economy,” the report also found.

The report concluded that scrapping the tax break entirely would lead to a 40 percent drop in highly-skilled migrants, while the new measures are expected to see a less significant, but still considerable decrease in highly-skilled workers coming to the Netherlands, by about 15 to 20 percent.

“The positive effect of the scheme on the influx of highly skilled migrants yields more in budgetary terms than the scheme costs, because all users pay less tax,” the SEO report concluded.

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