chapter 2

chapter 2

The government around us

In our country you can decide a lot of things yourself: which clubs you join or whether you do or do not go to church, whether you take a dog or not, etc. Still, you cannot always do as you please. Research shows that one in seven Dutchmen is affected by serious noise nuisance caused by neighbours. People often manage to come to a satisfying agreement with each other, but sometimes they cannot arrange things themselves. In such a situation you need rules that everybody has to comply with, even if they do not agree. These rules are made by the municipal government. Thus it is possible to live next to and with each other.

The government also interferes with us in other ways. For example, the national government takes care of the construction of dykes, education, healthcare, benefits, the police and the administration of justice. Who is this government and why does the government do this? Why do we not let private entrepreneurs take care of the production of all goods and the provision of all services?

Budget Day of the Ministry of Finance (Prinsjesdag) (www.rijksoverheid.nl)
How much Taxes on Petrol? (www.unitedconsumers.com)


Glossary chapter 2

Budget Day
Third Tuesday in September, when the national budget is presented.
Budget Memorandum
General explanation of the National Budget.
civil servants
People working in paid employment for the government.
collective goods
Goods that cannot be delivered to individual persons. Once delivered, these goods are automatically available for everybody, for instance a dyke.
collective sector
The government, the social security agencies and enterprises and institutions of which the total costs are paid by the government and which do not want to make a profit.
degressive tax system
A tax system in which the percentage of levied tax decreases if the income increases.
direct taxes
Direct taxes are levied on the incomes of citizens and enterprises: the wages and income tax and the corporation tax.
excise duties
An indirect tax levied on products with the purpose to reduce the consumption of those products, for instance excise duties on tobacco.
government bond
Citizens who lend an amount of money to the government, receive a government bond in return. This concerns loans to the government with a fixed interest rate and a term of usually ten years. It means that the amount lent is paid back by the government after ten years.
government deficit (= budget deficit)
The difference between income and expenditure of the government in a year, whereby the expenditure exceeds the income. Within the EMU it has been agreed that the budget deficit must not exceed 3% of the GDP.i/a ratio
Ratio between inactive persons (people on benefits) and active persons (working people).
indirect tax
A cost price increasing tax.
individual goods
Goods that are traded via a market.
income transfers
Income that you receive without having done anything productive in return for this.
National Budget
The plans of the government, along with the income and expenditure.
national debt (= government debt)
The government’s debt. In the EMU it has been agreed that the national debt must not exceed 60% of the GDP.
national debt ratio
The national debt expressed as a percentage of the GDP.
other cost price increasing taxes
Other taxes than VAT and excise duties, such as import duties, Private Motor Vehicle and Motorcycle Tax (bpm).
other public-sector workers
People employed by enterprises of which the total costs are paid by the government.
pay-as-you-go system
(Social) premiums received in a year are used to pay the benefits in that year.
private sector
All enterprises that are not owned by the government.
progressive taxation
Higher incomes pay a higher tax rate than lower incomes.
proportional taxation system
A tax system in which all incomes pay the same tax rate.
quasi-collective goods
Individual goods which the government supplies, such as education. These are goods which the government supplies because they are in the interest of society as a whole. The goods are supplied at cost price, below cost price or even for free. The products may be split up into individual units.
turnover tax (VAT)
As a consumer you pay VAT on the selling price. This is a form of indirect tax.


Exercises (Word)