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Since the prices at the fuel pumps are very high, the travel allowance is coming under increasing pressure. Purchasing power is decreasing significantly and this effect is not only being felt at the pump. From energy bills to groceries at the local supermarket, everything is becoming more expensive, resulting in a considerable dent in purchasing power. And as long as, among other things, the end of the war in Ukraine is not in sight, the expectations are unfortunately not rosy. Employers and employees alike are urged not to leave the rising costs solely to the employees. For example, the employees’ trade union CNV and the employers’ club AWVN are both arguing for a higher untaxed travel allowance.
Currently, employers can reimburse 19 cents for each kilometre the employee travels to work or other business kilometres untaxed. Any amount above this is in principle taxed, unless the employer designates this excess as final pay or uses the free space of the work-related scheme. In the case of the employer, this excess is taxed in the form of additional social security contributions and, for the employee, income tax. The costs are also independent of the mode of transport. The reimbursement is the same for travel by car, bicycle or public transport. Although, in the case of public transport, the employer can choose to reimburse the actual costs.
Pressure on the current travel allowance scheme
What is striking, however, is the fact that this regulation dates from 2006 and has not been amended since. Also, the reimbursement is not linked to any economic parameter such as inflation to keep the travel allowance in line with, for example, national purchasing power. Despite increasing criticism, the cabinet continued to adhere to this. A survey by the Dutch Association of Business Owners, for example, showed that the current travel allowance is well below par. For example, the costs of the cheapest cars at the time are at all times higher than the 19 cents per kilometre.
A survey by employers’ organisation AWVN shows that 44% want to change the rule out of good employment practices, but also because of the tight labour market. Employers are aware that, in the current situation, they can quickly lose staff to a competitor that is positioned closer to the employee, thus reducing the employee’s own contribution.
An important requirement for the majority of employers is that the current tax rules should be relaxed. The current method of taxation means that the employee can only benefit from a maximum of 50% of the additional compensation, and the employee is charged 20% more for the excess. As a result, employers say that what they pay out in excess of 19 euro cents per kilometre does not effectively serve the purpose of compensating the employee.
“Despite this motion, the cabinet decided to take some temporary measures that will remain active until 1 January 2023.”
During March 2022, a motion was already placed in the Lower House to flatten the higher costs for the employee and to spread them more between the employee and employer by means of a higher untaxed travel allowance which should apply as of 1 July 2022. Despite this motion, the cabinet decided to take some temporary measures that will remain active until 1 January 2023. For example, the fuel excise duty and the VAT rate on electricity and gas were lowered.
To the delight of the Lower House, it was announced on 22 May 2022 that the Cabinet would allocate 200 million in 2023 and 2024 to gradually increase the travel allowance from first 21 cents on 1 January 2023 and later to 23 cents per kilometre travelled. The initial request to bring forward this introduction was thus turned down and will therefore function as a successor measure rather than an additional one. The exact details, however, will be announced later during Prinsjesdag* (The day on which dutch King Willem-Alexander delivers his throne speech, which lists all the plans for the upcoming parliamentary session).
The cabinet is going even further. In response to the commotion that has arisen and the inclusion of an increase for untaxed reimbursement of travel expenses as of 2024 in the Coalition Agreement 2021-2025 of the current cabinet, the Ministry of Finance has started a study for a modernisation of the travel expense reimbursement. The Ministry indicates that it will investigate how the current travel allowance manifests itself in society. It will look at what proportion of employers offer a travel allowance and how this then flows through to various income categories. With a view to greening and sustainability, the type of means of transport is also being investigated. This research will be completed later in the year.
In summary, it is striking that, unlike previous cabinets, the current cabinet does feel compelled to change the form of the travel allowance. Based on the current research, it can be concluded that the last word has not yet been spoken on this topic and the future will show in what form this reimbursement will continue to exist.