Pseudo final high-salary levy

One of the measures aimed at reducing the budget deficit comprises the implementation of the temporary pseudo final high-salary levy, as a levy which has formed part of the Netherlands Wage Tax Act with effect from 1 January 2013.

The essence of the scheme in question was that final levies were due and payable by employers on their employees’ salaries where these exceeded € 150,000.00 in 2012. Although the scheme was originally designed as a one-off, it has since been extended to 2014 (with respect to 2013 wages). The pseudo levy has sparked a multitude of objections and lawsuits.

An employer argued before the District Court that it should not be permissible to levy the pseudo final high-salary levy on the salary earned by one of the substantial interest holders which the customary salary scheme had caused to exceed € 150,000.00 in 2012, in addition to which he described the levy as flying in the face of the principle of equal treatment. The District Court commented that rather than banning all forms of unequal treatment, the principle of equal treatment confined itself to scenarios where the inequality of treatment was not objectively and reasonably justifiable. The legislator enjoyed plenty of leeway in the fiscal sphere to determine whether particular cases were to be regarded as each other’s equal and if so, whether there was an objective and reasonable justification for treating them differently. The Court concluded that the legislator in introducing the employer’s levy had not overstepped the bounds of the generous assessment margin which was his. Employers on the one hand and business owners and recipients of earnings with incomes in excess of € 150,000.00 each on the other hand were not each other’s equals, and even if they had been, the Court continued, the choice in favour of an employer’s levy could not be regarded as being unreasonable. There had been no need for the legislator to make a distinction in the outline scheme between substantial interest holders and employees not being substantial interest holders.