The Job-related Investment Discount (BIK) has a limited effect on an increase in business investment.

It mainly leads to entrepreneurs shifting their planned investments.

At the same time, possible alternatives proposed by politicians, such as investing in housing or a reduction in profit tax, are not better options.

This is evident from an analysis published Tuesday by the Central Planning Bureau (CPB) at the request of the Ministry of Finance.

The BIK leads to "a limited temporary increase in business investments and also a shift in investments over time", the CPB writes.

The cabinet defended the measure on the contrary, arguing that investments are "crucial" for an economy like that of the Netherlands.

On the other hand, the alternatives to the BIK, which were partly suggested by the House of Representatives, do not come better from the analysis of the CPB.

"The increase is greater than if it were to be used for alternative schemes," said the planning bureau.

In addition to investing in housing (by means of a lower landlord levy) and a reduction in profit tax, the alternatives also consist of lower employer's contributions and another form of tax reduction on investments.

The BIK should primarily provide jobs, Prime Minister Mark Rutte initially said.

State Secretary Hans Vijlbrief (Finance) later partly returned to this.

Extra employment is a logical and welcome side effect, said the minister.

As the BIK is now designed, the measure has hardly any effect on employment or economic growth.

Greater effect for small businesses

If the BIK were to focus more on small companies, it would have a greater effect on investments, calculated the CPB.

That is just not the case.

The tax credit is only given if an employer invests at least 20,000 euros per year.

That amount may be too high for some small businesses.

Vijlbrief did try to make the scheme more attractive for smaller companies by giving lower investments, up to 5 million euros, a higher discount (3 percent) than amounts above (2.44 percent).

According to the planning bureau, the discount is only "hardly higher".

The CPB researchers write that an investment discount that is more focused on small businesses could have a greater effect in boosting the overall level of business investment,

The cabinet is allocating a total of 4 billion euros

The cabinet has earmarked a total of 4 billion euros for the next two years to get investments back to the old level as effectively as possible.

Due to the corona crisis, business investments will drop sharply this year, the CPB previously calculated.

With the BIK, employers will receive a discount on personnel costs for the next two years if they invest.

It is a crisis measure, that is to say, it is temporary to absorb the greatest economic blow.

But a solution to boost investment is not so easy with a one-off impulse, according to the CPB.

As a result of the BIK, investments increase by an average of approximately 2.5 billion euros every year.

That number is surrounded by a lot of uncertainty, because the CPB does not take the unpredictable economic developments into account.

In addition, companies that have been hit hard by the crisis will not invest at all.

It is certain that business investments this year will be about 10 billion euros lower, the CPB has calculated earlier.

'Gift for employers'

The opposition immediately received a lot of criticism of the tax credit.

Some parties see the 2 billion euros that will be released for 2021 and 2022 as a "gift for employers".

Moreover, the 2 billion euros is very similar to the previously defunct cabinet plans to abolish dividend tax and reduce profit tax for multinationals, according to the opposition members.

See also: 2 Billion Tax Discount: Gift for Employers or Essential for Jobs?