Households that own large capital appear to be able to achieve relatively high returns, because a larger share of their capital consists of assets with high long-term returns. The added advantages of taxing capital gains are that it works according to the ability-to-pay principle and would have a more stabilising effect on the economy. Disadvantages are the less stable level of revenue and a more complicated implementation. However, there also are other alternatives, as described in the Central Economic Plan 2015 (CEP) that is published today by CPB Netherlands Bureau for Economic Policy Analysis.

The CEP’s main figures were already published on 5 March. Today, the full report has become available, presenting the purchasing power figures for 2015 and 2016 in greater detail. Median purchasing power will increase this year by 1.2%, thanks to low inflation and declining pension fund premiums. The working population will benefit the most (1.6%). Pensioners benefit the least, by 0.7%, as their pensions are only partly indexed. There will be no median increase in purchasing power in 2016. With 0.3%, the working population again will gain the most. Pensioners will lose 1.3%, as a result of limited indexation of pensions as well as government policy.
 
The CEP, traditionally, contains a number of ‘frames’ within which certain subjects or issues are discussed. The central issues this year are: the quantitative easing by the European Central Bank, the fan charts that show the projections’ uncertainty levels, the rising asset prices, the recapitalisation of banks, the Dutch deficit reduction from an international perspective, and the revenues from natural gas sales.
The macroeconomic main data are as follows (read the press release of 5th March 2015). Economic growth is projected to increase this year to 1.7% and next year to 1.8%. The euro’s decline against the dollar, together with the sizeable drop in oil prices, has a positive effect on the Dutch economy. Recovery is steady and this year also supported by domestic spending. Employment increases substantially, but unemployment will only drop slightly, to 7% in 2016. Inflation will remain low, in line with European price developments. Consumption, company profits and investments, on balance, all receive an impulse from the low level of inflation. The budget deficit will decrease to 1.8% this year and 1.2% next year. The structural EMU balance, corrected for the economy and incidents, will be -0.5% of GDP in both 2015 and 2016. For both years this will be at the same level as the medium-term objective of the EMU balance (MTO), according to European budgetary regulations.

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