The tax break for high-skilled migrants, known as the 30% ruling, generates more revenue than it costs, according to a report for the Dutch finance ministry. This tax incentive, which allows selected foreign workers to receive nearly a third of their income tax-free for five years, has been effective and beneficial to the economy.

An independent review by SEO Economic Research has found that reducing the 30% ruling will lead to a 15-20% decrease in highly-skilled migrants, adversely affecting the Dutch business climate. The cut, implemented last year, changes the allowance to a sliding scale: 30% tax-free for 20 months, 20% for another 20 months, and 10% for the final 20 months. This new structure is more costly to administer and less attractive to potential migrants.

The report indicates that a higher percentage allowance attracts more highly-skilled migrants, improving the business environment and contributing positively to the economy. Eliminating the tax break entirely could result in a 40% reduction in knowledge migrants, which would negatively impact various Dutch businesses, from start-ups to major firms.

While the direct budgetary benefits of the scheme exceed its costs, the SEO report also highlights indirect economic benefits, such as increased VAT revenue, job creation, and higher salaries for other employees due to knowledge spillovers. The labor input from these migrants also helps address social challenges.

In 2022, about 110,000 people (0.6% of the population) in the Netherlands benefited from the tax break, filling specialist skill gaps. These individuals are typically highly-educated, under 35, childless men with higher than average incomes and full-time jobs. A survey of 7,000 beneficiaries revealed that many chose the Netherlands because of this perk, and the reduction in the duration of the ruling from eight to five years in 2019 led to a 19.6% drop in their numbers.

The report also debunks the claim that the 30% ruling significantly raises housing prices. The impact on rents and house prices, particularly in Amsterdam, is modest, with the ruling accounting for only a small fraction of the overall price increase driven by other factors like domestic tax incentives and landlord practices.