THE HAGUE, 02/09/05 - Finance State Secretary Joop Wijn is sticking to his proposal to tax employers extra if they provide redundancy payments that are actually intended as an alternative early retirement (VUT) scheme.

The extra tax of 26 percent only applies if the tax inspectorate can demonstrate that a disguised VUT scheme is being applied. If employees are dismissed due to a reorganisation or for being dysfunctional, the 26 percent levy will not be applied, Wijn wrote in a letter to parliament.

Wijn's announcement of the measure last May caused a considerable commotion in the Lower House and the union movement, prompting him to suspend it temporarily. A clear distinction has now been made between redundancy and disguised VUT schemes, in the Christian democratic (CDA) party's view. Labour (PvdA) however still finds Wijn's clarification insufficient.

The cabinet is abolishing tax-free savings for VUT from 2006. As well as the disguised VUT payments, there is another problem. This involves employers who have not yet succeeded in abolishing VUT regulations in collective labour accords (CAOs).

Social Affairs Minister Aart Jan de Geus had threatened that companies will be fined for VUT schemes that are preserved after 1 January 2006. Employers association AWVN feared that its members could face fines of 40 million euros a month. But the threatened fines will almost certainly not be imposed, as it has been agreed that the tax service will be "accommodating" in 2006.?