Mortgage interest deduction remains, can we whistle to Brussels billions?
Anyone looking for the word ‘mortgage interest deduction’ in the coalition agreement will find exactly zero results. CDA leader Wopke Hoekstra offered clarity last Thursday: “We have agreed that we will leave the mortgage interest deduction as it is now.”
A choice, given the fact that the Netherlands owns a house and that construction should be encouraged a little less, as far as Brussels is concerned. In fact, only with the reforms of the housing market can we claim money – about 6 billion euros – from the European corona recovery fund.
Abolition of mortgage interest deduction
That’s right. When submitting the plan, the Netherlands must keep in mind the European Commission every year indicates all the consequences. These matters are established after consultation with Dutch officials. In our country, the repaired labor and housing markets have been at the top of the list for years. And in the latter case, it would help enormously if the mortgage interest deduction is abolished, the Commission says.
After all, our high mortgage debts make the Dutch economy extra vulnerable. “When the economy is bad, the housing market is bad and vice versa,” explains economics Bas Jacobs. That is why the Netherlands often remains in a crisis longer than other countries.
The solution? Less high mortgage debts, they say in Brussels and at De Nederlandsche Bank.
Accelerated dismantling
One way to achieve this is an accelerated phasing out of mortgage interest deductions, so that taking on a high mortgage debt becomes less attractive. Yet there is nothing about this in the coalition agreement, which was displayed on Wednesday.
Rutte IV expects to comply with the Commission’s demands in a different way, it turns out. It is not necessary to take over all tasks, the Netherlands can make a choice. And that is still being negotiated with the Commission, explains a speech from the Ministry of Finance.
“The mortgage interest deduction is not the only thing that is important. It is a whole package that goes beyond the mortgage interest deduction,” he explains. The mortgage interest deduction is also already being phased out, and is still increasing.
Approval Brussels
The new cabinet apparently assumes that the labor market reforms and housing market measures are sufficient to expect the Commission.
According to Jacobs, the cabinet could still get there. “If Brussels says ‘this is a hard requirement’, then the Netherlands has a problem.” But often a solution is sought after all, sees Jacobs. “The Netherlands may come into consideration if it makes a compromise on something else.”
Not yet
The European Commission cannot yet say whether the reforms that the Netherlands is going to tackle will indeed be sufficient. “After all, the Dutch recovery has yet to be written and mentioned,” said one said.
Well a little later on a ‘necessary part’ of the repetitions. The Netherlands should not necessarily adopt all of Brussels’ considerations one-on-one.
No solution
Jacobs agrees with the European Commission that the Netherlands must reform the housing market. Although abolishing the mortgage interest deduction is not the solution, according to him. It would be better if your house was taxed net as shares and savings, a gradual tax and mortgage interest deduction of up to 30 percent.
“The incentive to take out as much mortgage as possible is then gone. And the government no longer controls how people build up their wealth.” But the cabinet is also failing that solution. “Nothing happens at all,” said Jacobs.
Dutch application
The Ministry expects a plan to be drawn up in Brussels in the spring. That is also necessary, because in order to be able to collect the full amount, the Netherlands must have a plan before the summer of 2022.
The Commission needs time to analyze the plans, and then the other EU countries have to give their approval. Those hurdles must be overcome before December 2022, when 70 percent of all subsidies must have been distributed.