Statement by Mr Paul van Kalmthout, Deputy Director General for Kingdom Relations and Governance at the Dutch Ministry of the Interior and Kingdom Relations, representing the Kingdom of the Netherlands.

Firstly, my thanks to you, Mr. Chair.
Ladies and Gentlemen,

Minister Pechtold regrets being unable to attend this meeting. He hopes you will accept his apologies for having to give priority to the Dutch referendum on the EU Constitution, which takes place today. We all hope his efforts will not be in vain.

Minister Pechtold personally asked me to congratulate you on the 20th anniversary of the European Charter of Local Self-Government.

Today, we discuss the Congress’s information report on the situation of Local and Regional Democracy in Netherlands.1 The report addresses two issues: the appointment of mayors and the proposed changes to local taxes. Let me begin with the mayor.

Earlier this year, as you may know, the Upper House of the Dutch parliament rejected proposals to remove the appointment of mayors from the constitution.
Minister Pechtold announced that the Dutch government would re-submit a proposal to amend the constitution in order to make way for the direct election of mayors in 2010.

In the excellent report by Mrs Smith and Mr Kvaloy, the Dutch government welcomes recognition that the Dutch system of appointment was made more democratic in 2001. We also appreciate the conclusion that the present situation in the Netherlands and the proposal for the introduction of directly elected mayors are in conformity with the European Charter of Local Self-Government.

The government of the Netherlands is of the opinion that the introduction of a system of directly elected mayors is a necessary step to regain the involvement of citizens in the political process. For this reason, election of the mayor by the municipal council has not been considered.

The government of the Netherlands is well aware of the problems relating to the direct election of mayors as raised in your report to the eleventh session of the Congress last year (Advantages and disadvantages of the direct election of mayors). These problems are elaborated in the present information report.2
We feel that all these problems can be solved. However, the government’s first priority is to amend the Dutch Constitution.

Minister Pechtold intends to consult all stakeholders on the issue of the direct election of mayors before sending any concrete proposals to parliament.

Bearing this in mind, the government of the Netherlands regards the information report as a support in the debate on the direct election of mayors that is to take place in the months to come.3
I now turn to the issue of local taxes and finance in the Netherlands. Let me start with some information on the present situation.

Municipal taxes and charges in the Netherlands amount to some € 7 billion. Half this amount is composed of taxes on property (real estate). Both owners and users of property pay real estate tax. Only a few weeks ago, the Dutch government submitted a bill to parliament to abolish real estate tax for users (real estate tax for owners will continue to exist.) Thus the power of municipalities to tax will be reduced by some € 1 billion. Municipalities will be compensated through an additional grant of the same amount to the Municipalities Fund. The total content of the Municipalities Fund will be increased to some € 11 billion. Municipalities are completely free to dispose of the resources of this fund as they wish.

The fundamental reasons for this reform of policy are twofold. First of all, there is strong criticism from citizens’ and consumers’ organisations against the level and annual increase of these taxes, which has been acknowledged by government. A second reason lies in the objective to prevent incomes policy at the local level. Municipalities tend to safeguard low-income groups from paying real estate tax. This practice is in conflict with an agreement between central government and the Dutch Association of Municipalities (VNG) that municipalities should not perform incomes policy.

The information report by Mrs Smith and Mr Kvaloy discusses the conformity of these proposals (and of the present local tax situation) with the European Charter of Local Self-Government. In addition to this, the report questions whether the proposals comply with Article 9 of the Charter, referring in particular to paragraphs 1, 3 and 7.4
The government of the Netherlands is of the opinion that the present situation in our country is in conformity with the Charter. The same holds true for government proposals on real estate tax.

The Municipalities Act (Gemeentewet) and the Financial Relations Act (Financiële Verhoudingen Wet [FVW]) guarantee sufficient resources for local authorities to implement policies at their own discretion. As mentioned previously, apart from the € 7 billion originating from local taxes/charges, municipalities have grants from the Municipalities Fund freely at their disposal (€ 11 billion). Of course, municipalities do perform specific tasks for central government; however, to be able to execute these tasks, they receive additional grants (up to a total sum of € 14 billion) on top of the € 18 billion of resources that they are free to spend as they wish.

Therefore, use of almost 60% of the € 32 billion within resources (7+11+14) is completely at the discretion of the municipalities. The abovementioned acts also provide a legal guarantee that the annual increase of Municipalities Fund resources be linked directly to the increase of central government resources (accrès). Furthermore, when specific tasks are imposed on local authorities, the Financial Relations Act provides the safeguard that central government must either explain how these tasks are to be financed or else it must provide additional grants (Art. 2 FVW)

The Dutch government acknowledges that its local taxation proposals diminish the tax-raising power of local authorities. The decrease is € 1 billion out of € 7 billion, i.e. a reduction of some 15%. The government also realizes that local taxation powers in the Netherlands are relatively limited from an international perspective. However, this situation should not be viewed in complete isolation. The situation vis-à-vis the Municipalities Fund should not be totally ignored either. The Municipalities Fund and local taxes/charges provide local authorities with substantial room for manoeuvre. Furthermore, we should bear in mind that local differences in taxes and expenses meet with weak acceptance from the citizens of a country with a small territorial area.

Nevertheless, the government of the Netherlands recognizes the pleas from many organisations for an increase in local taxation powers. However, as stated before, this requires an integral approach. At the end of 2004, the Dutch government and the IPO/VNG reached an agreement on coding the relationships between central, regional and local authorities. Part of the agreement was the establishment of a committee (chaired by Mr Eenhoorn) to study the possibilities of increasing local taxation power.

On 18 May this year, the committee’s conclusions were discussed at a meeting between the government and VNG/IPO. The outcome of this meeting was that central government would study the committee’s recommendation to increase local taxation power on its technical merits and would reach its conclusion this summer. Subsequently, the Dutch government hopes to reach an agreement with the VNG on the issue.

From this perspective, my government is of the opinion that both the present local taxation situation in the Netherlands and the proposed policy measures do indeed meet the requisites in Article 9 of the Charter, (not only paragraphs 1 and 7, as is stated in the report, but also – in spite of what the report suggests – paragraph 3).
The Dutch government appreciates that the report expresses views on the desirability and non-desirability of developments in the Netherlands within the context of the Charter. The government accepts conclusions that reflect these views wholeheartedly. However, in our opinion, it is a bridge too far to state - as the report ultimately does - that “acceptance by parliament of the present proposal would bring the Netherlands in conflict with international legal obligations”.

Therefore, the excellent report by Mrs Smith and Mr Kvaloy could be further improved by amending this very last sentence of their report.
I thank you very much for your attention.

 

1 Reference number of the report: CG/INST (11) 12 prov. – Strasbourg, 15 April 2005

2 - The relationship with dualisation - The position of the mayor as an independent and autonomous representative of the people - The balance between the election and dismissal of the mayor - Aspects of supervision - The transition process / period

3 The Dutch government has not yet addressed a change in the position of the Queen’s Commissioner at the provincial level. However, it is clear that changing the system of appointing mayors will have an impact on the discussions about the position of the Queen’s Commissioner.

4 Relevant paragraphs of Article 9 of the European Charter of Local Self-Government read as follows: 9.1 Local authorities shall be entitled, within national economic policy, to adequate financial resources of their own, of which they may dispose freely within the framework of their powers. 9.3 Part at least of the financial resources of local authorities shall derive from local taxes and charges of which, within the limits of statute, they have the power to determine the rate. 9.7 As far as possible, grants to local authorities shall not be earmarked for the financing of specific projects. The provision of grants shall not remove the basic freedom of local authorities to exercise policy discretion within their own jurisdiction.



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