The effects of job-related discounts

Bas Jacobs, Professor of Public Economics at Erasmus School of Economics, appeared on RTL Z to comment on the job-related discount (BIK) in response to an analysis by the Netherlands Bureau for Economic Policy Analysis (CPB). The purpose of BIK is to stimulate company investments. The plan will cost 4 billion euros over a two-year period.

The job-related discount is a measure that the Dutch government has implemented to stimulate investments by businesses. The investments will be set off against income taxes; as of January 2021, investments are eligible for BIK.

Ambiguous effects

According to analysis by the CPB, the effects of BIK may turn out to be ambiguous: by subsidising investments, companies will be able to further automatise their production process, thereby decreasing the amount of employees needed. On the other hand, the subsidy will enable companies to better withstand the far-reaching effects of the global pandemic.

Jacobs brings up a possible solution for these effects: if the main goal of BIK were to maintain as many jobs as possible during this crisis, it is better to directly alleviate wage taxes. The reasoning behind this is as follows: since BIK is an indirect instrument to decrease wage costs, it is possible to alleviate the burden of wages even further by directly cutting wage taxes instead of trying to achieve this by means of BIK.

Professor
More information

If you would like to watch the news item from RTL Z, 20 oktober 2020, you can click on this link.

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