Should mortgage interest deductibility be exchanged for state aid?

Peter Kavelaars, Professor of Fiscal Economics at Erasmus School of Economics
Erasmus School of Economics

The Minister of Finance, Wopke Hoekstra, is prepared to further reduce interest deductions in exchange for European aid. With the accelerated phasing out of mortgage interest deductions, the Minister hopes to raise €6.5 billion from the European Corona Recovery Fund. Peter Kavelaars, Professor of Taxation of Economics at Erasmus School of Economics, talks about it at BNR News Radio.

Kavelaars does not know whether mortgage interest relief should be exchanged for European aid, but he thinks it could be a useful push in the right direction. According to him, the Netherlands is ready to discontinue the regulation, which, with its low interest rate, provides few advantages.

Peter Kavelaars emphasises that the rule cannot be removed from one day to the next; a transitional arrangement is needed to overcome long-running contracts. He also raises the question of whether housing should be taxed in box 1 or box 3 or whether it should be taxed at all. Defiscalising housing means that no more tax has to be paid on fictitious income; this also means that the debt is no longer deductible. According to Kavelaars, alternatives need to be considered.

More information

Listen here to the entire BNR Nieuwsradio broadcast, 26 August 2020.

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