CPB Netherlands Bureau for Economic Policy Analysis

We show that gifts made to heirs before death are substantial and highly responsive to taxation. Using intergenerationally-linked administrative data from the Netherlands and exploiting variation in the timing of death, we find that single people (including widows) with children transfer around 10 % of their wealth to their children in anticipation of death. This is almost entirely in the form of tax-exempt gifts. Exploiting bunching at kink points in the gift tax schedule and a reform to inheritance taxation, we estimate elasticities of gifts and wealth to taxation and find that tax-avoidance accounts for at least a significant minority of this deathbed giving. The ability to make tax-favoured gifts means that the revenue-maximising flat inheritance tax rate is at most 37 %. Equalising the tax rate on deathbed gifts and inheritances at death would increase revenues raised from singles by 10 %. • In the Netherlands, single people with children transfer around a tenth of their wealth to their children in anticipation of death. • Those with larger amounts of wealth and who suffer a health shock further in advance of death make larger deathbed transfers. • These transfers are responsive to tax incentives to transfers wealth as gifts while alive rather than after death. • The ability to make tax-free gifts limits the revenue-maximizing flat rate of inheritance tax to 37 %. • A reform that taxed deathbed gifts at the same rate as inheritances would increase inheritance and gifts tax revenues from singles by 10 %.

Abstract Redirecting royalty payments across jurisdictions is a well-known strategy of large multinationals to reduce corporate income taxation. The global impact of these taxes on the direction and size of the royalty payments is, however, seldom investigated. From our network analysis, based on national and bilateral tax rates, we infer which bilateral payments could be tax motivated and which could only be business motivated. Next, we apply a gravity framework with PPML estimators to explain the variation in the latter payments. Using these regression outcomes to predict the business motivated content of the other royalty payments, we find that 13–25% of all flows is motivated by tax planning, which reduces tax revenues by 3.3–8 billion US dollar in 2018 in our preferred specification. We argue that both estimates are lower bounds, mainly due to missing observations. To the best of our knowledge these are the first estimates of the global tax revenue loss by redirecting royalties.

We empirically investigate how rent control combined with the use of a non-market allocation mechanism – centralised waiting lists – affects the efficiency of housing allocation among public-housing tenants. We show that, on average, Dutch public-housing tenants consume a house whose value differs by 7.5% from what they would consume under an efficient allocation. This entails particularly large transfers in housing consumption from younger households to older households. The annual welfare loss arising from misallocation within the public-housing sector is modest, estimated at around €65 per tenant. • The study examines the impact of rent control and waiting lists on allocation efficiency among Dutch public housing tenants. • Public tenants consume a house whose value differs by 7.5% from what they would consume under efficient allocation. • Annual welfare loss per tenant arising from misallocation is modest, estimated at around €65.

Abstract Preserving or improving biodiversity outcomes requires a coordinated approach across policy levels and land managers. Agri-environmental collectives in the Netherlands adapt environmental policies to local conditions and coordinate the conservation efforts of their members. This paper describes the functions performed by the Dutch collectives through a meso-institutional lens and assesses whether the effectiveness of agri-environmental schemes has improved since the introduction of the collective approach. To this end, we use a case study of one of the Dutch collectives, and a mixed-methods approach including interviews and quantitative assessments of changes in the spatial coordination of the agri-environmental scheme for meadow bird conservation since the introduction of the collective scheme. The analysis shows an increase in contracted farmland area and spatial coordination of the contracted measures on these farmlands. The results highlight the potential value of the collective approach for the implementation of environmental policies for biodiversity.

Demand-side cost-sharing reduces moral hazard in healthcare but increases exposure to out-of-pocket expenditure. We introduce a structural microsimulation model to evaluate both total and out-of-pocket expenditure for different cost-sharing schemes. We use a Bayesian mixture model to capture the healthcare expenditure distributions across different age–gender categories. We estimate the model using Dutch data and simulate outcomes for a number of policies. The model suggests that for a deductible of 300 euros shifting the starting point of the deductible away from zero to 400 euros leads to an average 4% reduction in healthcare expenditure and 47% lower out-of-pocket payments.

The authors estimate the effects of an increase in the youth minimum wage in the Netherlands on low-paid workers’ employment and earnings, using a difference-in-differences approach with detailed administrative data. Findings show that the increase does not have a negative effect on the number of jobs or hours worked, hence raising overall earnings for affected workers. Further, the minimum wage increase has substantial spillover effects, accounting for close to 70% of the average wage increase experienced by workers. While employment grows in fixed-term and temporary help agency contracts, the authors do not find evidence of declines in employment in other types of work arrangements, nor of labor-labor substitution. Labor market outcomes evolve most favorably for full-time incumbent workers who are not enrolled in education and are thus less likely to be transient occupants of minimum wage jobs.

It is well documented that the public is often poorly informed about the economy. In the domain of fiscal policy, this may make voters susceptible to favour spending, while underestimating its costs (fiscal illusion). While politicians may have more information to judge the need for prudent economic policies, voters may be less inclined to support prudent fiscal policy if they do not believe that these politicians act in their best interest—an idea that in recent decades has become more prevalent. Using a novel dataset from the Netherlands, this paper examines whether strong populist ideas lead to more expansionary fiscal preferences, thereby reinforcing the risk of fiscal illusion. The findings indicate that respondents' populist attitudes significantly predict their fiscal preferences. Additionally, higher literacy and information provision contribute to more prudent fiscal preferences. However, the impact of literacy is conditioned by the level of populist sentiment. Poorly literate respondents show higher support for tax relief only when holding strong populist attitudes, not when expressing lower levels of populist sentiment.