Reform of the benefit system is needed!
A topic that has been discussed a lot: the childcare benefits scandal. This opened up even the last supporters of the current system. The benefit system is far too complex and can turn into painful situations.
In 80% of all cases, the tax office sends a correction afterward, which can lead to high chargebacks. Especially the people who are dependent on these benefits and report changes in their situation too late, get in trouble. One thing is for sure: the benefit system must change, but how?
The cabinet is busy with improving the “outdated” benefit system. In this improvement, it is important that the human dimension returns so people regain confidence in the system. To achieve this, three pillars have been drawn up to focus on:
Improving legal protection.
More human dimension.
Change in the concept of partnership.
We cannot yet tell you what will change exactly. This will become clear after the reform of the cabinet. But, three variants have been put forward.
Option 1: Guarantee accessibility by lowering prices.
In this first option, the prices will be lowered (think of: healthcare, rent, and childcare), and the legal minimum wage will be increased. As a result of this option, the income support on household income (benefits) will be shifted to the income support on individual income: the services will have a lower price and these will be paid via higher tax rates.
Option 2: Income-independent support with distributable tax credits.
This second option aims to solve the problem by abolishing the benefits through distributable tax credits. This support will focus as much as possible on income-independent instruments. When focusing on income, the problem will only move. As mentioned earlier, the problem lies in the wrong estimate of your income.
Option 3: Comprehensive simplification for taxes and benefits.
This third option contains the most drastic measures: the entire benefit system will stop here. Besides, all deductions and tax credits will be canceled. This option has major consequences for the design of the entire tax system:
There will be four tax brackets and several income-independent allowances based on, for example, age, single / partner, number of children. It is good to know that the childcare benefit has not been included because this will lead to significant income effects that cannot be absorbed by this new system.
Whether one of the three options will be executed exactly as mentioned before? No, probably not. Each political party has its own plans.
Which option will be implemented and which adjustments will be made, depends on the newly formed cabinet. But one thing is clear: the system is going to change.
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Do you struggle with the benefit system yourself? Or do you have other tax-related questions? We are happy to help! Please contact us for a free introduction using our details mentioned below!