By: Professor Janka Stoker & Professor Harry Garretsen
The debate on tax on dividends was primarily about the leadership style of our Prime Minister. Mark Rutte is the perfect example of a transactional leader. This is the archetype of political leadership: ‘Give me your vote and I’ll lower your taxes.’ For this quid pro quo model, the voter’s vote is directly linked to (the promise of) something in return from the politician. In contrast to this, is what is known as transformational leadership, which is something more personal. Here a leader has an inspiring vision that emphasizes a collective interest. One of the main points of criticism against Rutte is that he has too little vision and should look for the bigger picture to convincingly sell his policies to the public.
Despite this criticism, Rutte is in his third cabinet and still appears to be averse to that other, visionary leadership style: ‘for vision you should go to the optician’, says über-pragmatic Rutte. He therefore continues to be the prototypical transactional leader, who, as any merchant would, sees the business of politics as a sequence of political transactions. Was this what we saw last week in the debate on tax on dividends?
At any rate, scrapping the tax on dividends is the ultimate example of a transactional deal: there is no evidence whatsoever that scrapping this tax will achieve much for our economy. In exchange for scrapping the tax, what the Cabinet ‘buys’ (and hopes) is that multinationals such as Unilever and Shell remain in the Netherlands. But what stood out most was Rutte’s atypical leadership style when he defended this measure in the Dutch House of Representatives in November. Because for once his performance was very different in nature. The pragmatic Rutte was suddenly personal. He felt ‘from the bottom of my heart’ that scrapping the tax was crucial to our prosperity, thus appealing to a greater collective interest. We shouldn’t see scrapping the tax on dividends as a deal with Unilever and Shell but as an investment in the future of the Netherlands.
Sure enough, with these Big Words transactional Rutte chose the transformational route – with, five months later, a motion of no confidence and a significant dent in public trust as the initial anticlimax. The opposition has never been as critical about his performance. The criticism was ostensibly about whether he correctly informed the House of Representatives, but what it was really about was confidence in Rutte as Prime Minister. That confidence has suffered a knock, essentially because Rutte took a prime example of a transactional dossier – in the category of quid pro quo, ‘tax goes, Unilever stays’ – and tried to dress it up as a visionary one. And that attempt to wrap this commercial agreement between the Cabinet and a few multinationals in a greater, higher message returned like a boomerang to hit Rutte. When it became clear from the official documents that there was no pretty wrapping around the deal between the government and the multinationals, there was little that the Prime Minister and governing parties could do than use the not particularly elegant defence of ‘gaps in the memory.’
The bigger picture, and the emphasis on the collective interest, only works if there actually is a collective interest, of course. With the best will in the world, it’s hard to find one for a tax deal with multinationals, however useful it may be. In such cases, the best thing for Rutte to do is stick to his transactional roots, which means being a merchant and not a vicar. That may not be very inspiring or visionary, but it is clear and honest. Sticking to his style and acknowledging in November already that scrapping the tax on dividends was a purely commercial transaction would also have garnered criticism, but at least the confidence in the Prime Minister and thus in the government would not suffered such a battering.
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