Legacy Monitor Netherlands is now entering its third year, with 15 large Dutch charities who together account for almost half the top 100’s legacy income. We asked our partner Arjen van Ketel for his view on the Dutch political and economic environment, and what it might mean for legacies.
As Legacy Monitor Netherlands’ analysis shows, legacy giving in Holland is growing. Many of the long-term trends driving our market are common to most European countries: more elderly inhabitants, economic growth resulting in higher stock and house prices and an increasing percentage of older childless people.
But recent factors unique to Holland are causing new uncertainties. For example, what impact will last month’s elections have on donor confidence? How will Brexit affect the Dutch economy, and what will that mean for legacy values? And how might potential changes to pension systems and inheritance rules affect Dutch donors’ ability and willingness to leave a gift?
Fragmented votes are causing political stalemate
The elections for a new parliament on March 15th attracted big international attention: would Holland see the next swing to populism after Brexit and Trump? First of all the good news: there was no breakthrough for the right-wing populist Geert Wilders – politically his party will stay isolated. On the other hand, the left of centre Social Democrats suffered a big loss, and will not be part of the cabinet in this term. Overall, Dutch electors have swung towards more central and conservative candidates, and have spread their votes over more parties than ever. The leading Liberal Conservatives diminished, but kept their number one position. The next five parties are nearly the same size now.
This fragmentation will make the formation of a new government more difficult as it takes at least four parties for a majority. The most optimistic prognosis is for the set-up of a new cabinet by the beginning of summer. A centralist conservative government with either a right wing or a left wing party are both possible. If the formation process takes much longer, the political uncertainty is likely to damage consumer and business confidence; and also thwart any major changes in policy in the longer term.
Legal and tax changes may affect legacy giving
Compared with the UK, ‘civil society’ is a neglected subject. The government seems to have no other objective than controlling the not for profit sector. The focus is on preventing money laundering, the financing of terrorism and misuse of tax benefits. ‘Civil society’ is just not on the politicians’ radar. But still, charitable legacies may be affected indirectly by broader tax and legal changes.
The pension system in the Netherlands is very good. Every retired household receives a social old age pension. Most older people also take part in well-organised occupational or private pension schemes. As in the UK, both systems are under threat as the number of recipients increase and the pension funds are hampered by low interest rates. These issues were leading in the election campaign. There is even a new Party for the elderly: the so-called ‘50Plus’ party which campaigns for bringing back the state retirement age from 67 to 65, for the indexation of private pension schemes, and an increase in the state old age pension level. Older people report a growing uncertainty about their future income, but this seems contradictory: as elsewhere, Dutch older generations are actually richer than ever before!
Another discussion will be the inevitable simplification of the tax system. There is a small risk that this will also affect the inheritance tax system and levels, which are currently very much in favour of charitable legacy giving (in Holland IHT on all charitable gifts is zero).
Brexit impacts on the Netherlands too
On both economic and political levels, Brexit is bad for Holland as well as Britain. When it comes to trade, the United Kingdom is the most important external market for the Netherlands. On a political level the UK has long been our closest ally in the European Parliament. Forecasts produced in autumn 2016 suggest that Dutch GDP will be 1.2% p.a. lower over the next 20 years as a result of Brexit. This is likely to have a small knock-on effect on legacy values.
Recent internal advice to the Dutch government is to enforce political alliances with Germany and France, and at the same time repair all potential Brexit-damage, by redeveloping good economic relations with the UK.
Overall, the political landscape is still stable, although slightly more uncertain than before. When it comes to legacy giving, most demographic and economic indicators are positive, but a lack of political interest in Civil Society may bring tax and legal changes, which make it harder for Dutch charities to thrive. And Brexit is a threat to the Dutch economy in general, including the income of charities.
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