Can the exorbitant reimbursements of expenses of members of parliament be justified?

NPO Radio 1
Erasmus School of Economics

Dutch members of parliament receive 7700 euros expense allowance, without having to justify for these expenses. This compensation seems exorbitant, considering the maximum reimbursement for regular employees is around 2400 euros. Peter Kavelaars, Professor of Economics of Taxation at Erasmus School of Economics, was a guest at the Dutch radio station NPO Radio 1 on 5 February 2020 and explained what the problem is with these reimbursements and what would be a possible solution.

‘The regulation is in principle regulated by law. However, when we look at the Dutch law, it is questionable whether this regulation should have been accepted in the first place and whether a part of the reimbursement should be taxed as wage.’ The current amount seems to have been determined without any form of justification while a reimbursement of expenses should cover the actual expenses the employee makes.

So, what expenses do members of parliament make? Of course, all members of parliament must travel to The Hague on a regular basis. The problem here is that no distinction is made between members who travel from within the area and members who have to travel longer distances. ‘It is basically an undifferentiated regulation which definitely needs to be looked at again.’, says Kavelaars.

Kavelaars suggests that the best solution would be to simply use a fixed amount for general costs and then look at specific costs that may vary from one member to another. According to the tax authorities, the regulation is legally approved, and the state even pays eighty percent tax over the amount. Kavelaars, however, sees two problems with this argument: first, the question is why the state pays tax over this amount when the taxes end up with the state anyway. Second, this tax only applies to the minority of all members of parliament who chose to be assigned as employee instead of own-account worker. The statement of the tax authorities does not take this into account and still not justifies the exorbitant amount members of parliament receive.

Professor
Faculty
Erasmus School of Economics
More information

The entire item from NPO Radio 1, can be found here: timeslot 08:00 - 09:00 AM, from 37 minutes onwards (in Dutch).