The report was prepared by an IMF team consisting of Messrs. M. S. Kumar (head), W. Allan, M. Skaarup, and H. van Eden, which visited the Hague on December 6–21, 2005. During its visit, the team held discussions with Mr. Zalm, Minister of Finance, and with a wide range of senior staff of the Ministry of Finance and spending ministries, including representatives from several line ministry directorates of finance (FEZ). The mission met with the Director of the Netherlands Bureau of Economic Policy Analysis (CPB), Mr. Don, and senior CPB officials, and with senior officials from Statistics Netherlands, the Court of Audit, De Nederlandsche Bank (DNB), the Dienst Regelingen of the Ministry of Agriculture, Nature Management and Fisheries, the Board for Health Care Insurance, the Rabobank the State Debt Management Agency, South Holland province, Delft municipality, and a member of the parliamentary Council of Economic Advisors. The mission’s visit was coordinated by Mr. Vossers, Director of the Budget and very ably guided throughout by Messrs. van Hengel and Zwerk of the Ministry of Finance.
An example is the Board for Health Care Insurance (CVZ), which is designated as a ZBO and is legally independent of the Minister of Public Health, yet works under similar conditions to a departmental agency and consults closely with the minister. In contrast, some agencies of government (notably the Netherlands Bureau for Economic Policy Analysis (CPB), which is described in more detail in Box 4) work independently of ministerial direction.
All ZBOs having a budget above 14 million euros (currently 43) are obliged to bank at the MOF. In most cases, the responsible ministry approves the yearly plans and budgets.
Both departmental agencies and ZBO’s are part of general government from a statistical point of view. If market activities are pursued by ZBO’s these are separated from the public policy task in the national accounts.
Owned 50 percent by central government and 50 percent by local governments and commercial banks. The Bank for Dutch Municipalities provides loans to local government, utilities, and public sector entities.
Non-diversification leads to higher portfolio risk, and, thus, implies a public policy choice to accept below market rates of returns.
See http://kenniscentrumpps.econom-i.com/uk/pps/kennis_intro.html. Guidelines on PPPs and procurement in the Netherlands are provided at http://kenniscentrumpps.economi.com/uk/pps/pdf/procurement.pdf.
See http://www.dnb.nl/dnb/bin/doc/bankact1998_tcm13-36143.pdf for Bank Act 1998, Articles of Association of De Nederlandsche Bank N.V., and Statute of the European System of Central Banks, and of the European Central Bank.
At that point a minister risks a vote of no confidence. The upper chamber can only accept or reject the budget.
The tasks, roles and responsibilities of provinces and municipalities are determined by two laws, the “Provinciewet” en de “Gemeentewet,” respectively. Financial relations with central government are specified in the law “Wet Financiering Lagere Overheid.” Each layer of government has its own responsibilities and its own, democratically elected administration. An overview of devolution and responsibilities is given in http://www.cor.eu.int/document/documents/paysbas_en.pdf. Main executive administrative responsibilities for overseeing intergovernmental relations lies with the Ministry of the Interior and Kingdom Relations, which has responsibility for (i) coordinating the legally determined division of tasks among the three layers of government; (ii) supervision of the implementation of legal requirements by local government; (iii) appointment of provincial governors and the mayors of municipalities; and (iv) coordination of cooperation between local government and other public authorities and administrative bodies, such as the water control boards. In addition, the Ministry of Interior coordinates relations with the Netherlands Antilles and Aruba.
A reduction or increase in the level of central government spending will alter the grant by about 20 percent of the central government change.
The general grants are channeled to local governments through two Funds, the “Provinciefonds” for the provinces, and the “Gemeentefonds” for the municipalities. The Funds are administered by the Ministry of Interior.
For instance, specific grants for social assistance (run by the municipalities) is set in relation to unemployment levels and is independent of performance during the year. Though level of benefits and eligibility are set by national law, local authorities can determine the best way to utilize the grant in their area and can retain any surplus funds.
This regulation would come into effect at a signal value of the EMU-deficit of 2½ percent of GDP.
Maximum short-term debt of a municipality must not exceed 8–10 percent of the municipality’s total budget; long-term debt repayment must not exceed 20 percent of total long-term debt.
The net gas revenues are treated as nontax revenues and are determined on the basis of a complex profit sharing arrangement between Shell, Exxon, and the Dutch state which originates from a “gentleman’s agreement,” “Herenakkoord,” from the 1960s between the three parties, which has been amended and revised multiple times, but which in essence has (reportedly) remained unchanged.
The Infrastructure Fund is also fed with resources directly from the Ministry of Transport and Waterworks’ own budget. The Infrastructure Fund is the main planning mechanism for large-scale, multiyear infrastructure projects in the Netherlands.
See http://www.minfin.nl/default.asp?CMS_ITEM=MFCR3713314F2708211D5BFFF00104B3F BE32, covering, for instance, Revision of Taxation 2001, describing in detail the objectives and structure of the Income Tax Act 2001, and Taxation in the Netherlands, MOF, 2005, a regularly updated brochure aimed particularly at providing information for international companies.
See “Tax Expenditures in the Netherlands,” by L. van Ende and others, Chapter 6 in Tax Expenditures—Shedding Light on Government Spending, edited by H. Brixi and others, World Bank, 2004. Gray areas include personal income tax deductions for payments of mortgage interest and contributions to pension and early-retirement schemes, which are included as part of the benchmark rather than estimated as tax expenditures.
In 2006, The SoFi-number will be replaced by a multifunctional Citizen’s Service Number (BSN), administered by the Ministry of Interior. This number will help eliminate the need for duplicate submission of personal details. See http://www.minbzk.nl/persoonsgegevens_en/gemeentelijke/persberichten/burgerservicenum mer
It is proposed in the near future to establish individual call centers on the internet, where taxpayers will be assigned their own domain to enable them to seek advice or information on tax matters.
Judges, for example, have not been allowed to have remunerated secondary activities (above a certain level), but a recent stocktaking revealed that a considerable percentage still had paid secondary professional activities.
With The Netherlands’ participation in the Economic and Monetary Union (EMU), the government has accepted constraints to its fiscal policy as set forward in the Stability and Growth Pact. These constraints relate to agreed policy aims, such as a structural surplus over the economic cycle, and a maximum deficit level of 3 percent and of public debt of 60 percent of GDP. Related to these policy constraints, EU members are required to present their medium-term fiscal policy in yearly Stability Programs and report on actual deficit realization during the budget year on a quarterly basis. The EMU membership has, thus, forged a relationship between the domestic budgetary process and fiscal concepts defined in EU regulations. Most prominent amongst the latter is the general government deficit concept as defined in ESA 95. This deficit concept—referred to in The Netherlands as the EMU deficit -, is accrual based, although investment is treated as any other expense, that is no depreciation concept is used. Domestic fiscal and budgetary policy was and is largely based on cash accounting and focuses on central government. Obviously, the EMU fiscal constraints have required a translation between domestic and EMU fiscal concepts which is evident in budget documents and reporting.
IFAC-PSC has described broad guidelines for accounting standards in government covering both cash and accruals systems.
The Netherlands has a virtual treasury single account. Line ministries and agencies operate their own commercial bank accounts for expenditures and revenues transactions but these are zero-balanced with the government’s main central bank account twice a day by the General Treasury’s Cash Policy Department.
Collusion of construction companies has in the past proven difficult to tackle, as witnessed by the parliamentary investigation in “Construction Fraud.”
See budget memorandum 2006, page 98.
The 2004–09 strategy is described in the brochure “Effective and Transparent: Performance and Operation of Public Administration.” See http://www.rekenkamer.nl/9282200/v/.
Except for extraordinary circumstances, for example when the government’s negotiation position vis-à-vis third parties would be revealed on major issues.
The law: “Wet op het Centraal Bureau voor de Statistiek,” was enacted on November 20, 2003.
The United Kingdom, for instance, publishes tables showing tax expenditures and “structural reliefs,” the latter being considered part of the tax structure, while tax expenditures are seen as being potentially substituted by direct subsidies. Australia provides a relatively complete description of the benchmark structure for each tax.
With respect to mortgage interest deductions, it can be argued that these are part of the cost of earning the imputed rent income from home ownership, which is taxed in the Netherlands. Disclosure of such elements provides additional information on the tax benchmark structure.
The Aide-Mémoire was prepared by an IMF team consisting of Messrs. M. S. Kumar (head), W. Allan, M. Skaarup, and H. van Eden, which visited the Hague from December 6–21, 2005.
Both directly and indirectly (through grants made available to local governments) the expenditure ceilings cover around 90 percent of general government expenditures.
As the ROSC indicates, further work is needed to examine the management implications for the municipalities.
The July 2005 changes in the Stability and Growth Pact made room for country specific consideration, rather than requiring a budget balance near zero or in surplus over the medium term.
Although in principle, estimates of trend output should not vary substantially year-to-year, in practice this is not the case often due to sharp revisions in forecasted output. In this context, the use of medium-term estimates that are only revised gradually can be useful.
In this context, the usefulness of alternative projections, by domestic as well as external institutions, as a check, and as a spur to further improving the methodology for forecasting does not need emphasizing.
In this context, it should be noted that there is a trade-off between the signal value and additional adjustment effect: the lower the value the more other additional (pro-cyclical) measures need to be taken.