Memorandum in response to BIK report

The Job Related Investment Discount (Dutch abbreviation: BIK) scheme has been bolted on to the 2021 Tax Plan by means of a Memorandum of Amendment, with the Junior Finance Minister in a supplementary memorandum in response to the BIK report providing answers to questions concerning the proposed arrangement.

The BIK scheme is aimed at safeguarding business investment levels where possible, to which end a withholding tax rebate is to be introduced at a rate of 3 percent of the investment amount for investments of up to 5 million euros each and 2.44 percent of the surplus where the investment in question comes with a price tag in excess of 5 million euros. The Cabinet is hopeful that the BIK scheme will prove to be a welcome addition for those businesses that are having to make investment decisions. According to CPB, the Netherlands Bureau for Economic Policy Analysis, the BIK scheme will indeed to a certain degree spark additional investments being made, at an increase which it has projected as averaging out at 2.4 billion euros per annum for 2021 and 2022 compared with 0.9 billion euros per annum for 2023, 2024 and 2025. The Bureau is expecting the BIK scheme to trigger the substitution away from labour towards capital owing to businesses being inclined to opt for labour-saving (rather than labour-using) investments. According to the Bureau’s projections, reducing employer’s contributions would be the sole route for ensuring that unemployment rates should recover (and only slightly at that). As this particular route is expected barely if at all to benefit business investment levels, the Cabinet has declined to go with it.

Dutch version: Nota naar aanleiding van het verslag BIK