The Dutch government shuts the door on corporate social responsibility

Non-business donations from companies will no longer be fully tax-deductible starting next year. That might sound like a dull tax regulation, but it’s not. It’s a foolish decision that makes it much harder for companies to channel money back into society.

And if you’re thinking, “But don’t entrepreneurs just do it for the money?”, let me share a secret with you. Most entrepreneurs don’t start their businesses to become incredibly rich. Research from the United States shows that only 8% of entrepreneurs cite money as their primary motivation. Broader studies reveal that the main motivations for starting a business are the freedom to do your own thing, realizing and sharing your ideas with the world, learning and developing, making an impact, and contributing to society.

Yet, the government is now making it harder to allow money from these businesses to flow back into society. I think that’s a very foolish idea, and I’d like to attempt to explain why.

Profit is not a goal; profit is a consequence

It’s late August when the plum tree buckles under its own weight. It’s full of plums, and my eldest son comes up with a plan. The most beautiful plums are picked and placed in handmade paper trays. He then goes around to the neighbors to sell the plums. My neighbors are willing to trade their money for these delicious, organic, hand-picked plums. They pay for the experience and the fruit. That is the customer value of my son’s business. I cut my son some slack and don’t charge him for the plums or the paper, so every tray sold is pure profit.

This is the essence of a business: you create value for a customer, who is willing to pay for it. The customer value minus the costs of creating that value equals your profit.

Note: profit is therefore not the goal of a business. The primary goal is to create customer value. Profit is merely a consequence of doing the right things for the right customers.

What do companies do with that profit?

That profit-making isn’t the goal also becomes clear when you look at what entrepreneurs do with their profits. One of the most important motives, besides creating customer value, is making an impact and contributing to society.

In 2022, companies donated an estimated €1.8 billion to charitable causes. These donations were encouraged by the government, as business donations were fully tax-deductible. However, this only applied to donations that served a clear business interest, such as:

• Sponsorships that increased the company’s brand awareness
• Donations to organizations in which the company had a stake

Donations in the context of corporate social responsibility were only partially deductible.

Business and non-business donations

There are also so-called non-business donations. Non-business giving means that, as a company, you donate money to causes you find relevant, without receiving anything in return.

These are primarily donations to charitable or social causes without any return in the form of sponsorship, collaboration, or promotion of your business. These donations used to be taxed.

In essence, you can make business donations in exchange for marketing value, but donating because it’s the right thing to do, without expecting anything in return, costs money.

This changed in 2023. Non-business donations also became tax-deductible.

The connection between non-business giving and steward ownership

The removal of taxes on non-business donations allowed entrepreneurs to invest more broadly in social causes. Donations to foundations with an ANBI certification (public benefit organizations) or institutions with social purposes (SBBI) became fully tax-deductible. This allowed company profits to flow directly back into society.

It also made it possible for me to give Voys back to itself. By donating Voys’ shares to an ANBI foundation, Voys became a steward-owned company instead of a founder-owned company.

Steward ownership brings significant benefits to the Dutch corporate landscape. One of these is that economic rights—yes, the money—don’t end up with a single owner but flow back to society, just like non-business donations.

Non-business donations no longer possible: this is the impact

However, the current government has decided to reverse the tax-exemption for non-business donations. From 2025, non-business donations by companies will no longer be fully deductible. And that’s a real shame. This change not only makes the transition to steward ownership unaffordable for existing companies but also imposes taxes on giving back to society without expecting anything in return.

It’s important to understand where these donations go. This decision has very tangible consequences:

• Less money for healthcare and medical research through foundations like the Dutch Cancer Society (KWF) and the Diabetes Fund.
• Less money for international aid and development cooperation, such as UNICEF and the Red Cross, especially now, when these organizations—and the people they support—urgently need our donations.
• Less money for environmental and nature conservation, as a growing number of donations focus on protecting the environment, biodiversity, and combating climate change.
• Less money for the arts and cultural sector, which is already severely affected by a combination of VAT increases and reduced subsidies, despite the significant value it adds.
• Less money for social care and poverty alleviation, often targeting local initiatives in your neighborhood or village, such as the church, food banks, or the Salvation Army.

Let companies truly contribute to society

“It is this government’s belief that the power of society should be nurtured and stimulated, not restricted,” states the coalition agreement. Fine words, but as an entrepreneur, I can tell you that real change comes through action. Make socially responsible entrepreneurship easier. Ensure that companies acting with social responsibility are supported rather than hindered. Let the funds available in companies easily find their way to society. This will give us all a future-proof economy.

And if you’re an entrepreneur who wants to make a broad donation to a great cause, you have until December 31, 2024.