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In rightward shift, Dutch PM seals new government pact

THE HAGUE (Reuters) - Dutch Prime Minister Mark Rutte sealed a deal to form a new coalition government on Tuesday, announcing a major tax overhaul and steering the Netherlands towards the political right.

Leaders of the four parties in the new government coalition attend a news conference in The Hague, Netherlands, October 10, 2017. L-R: D66 party leader Alexander Pechtold, Prime Minister Mark Rutte of the VVD party, Christian Democrat party's Sybrand Burma and Christian Union party's Gert-Jan Segers. REUTERS/Reuters TV

The four-party coalition talks were the country’s longest since World War Two, overtaking a record of 208 days set in 1977 as the parties struggled to bridge wide differences.

Among the issues discussed in often fraught debates were migration -- a topic which dominated the national election in March in which the anti-Islam party of Geert Wilders finished second -- taxation and euthanasia.

“It took a long time, but we have an ambitious and balanced plan that will benefit all,” Rutte said, presenting the pact.

Rutte, who leads the liberal VVD party, will head his third government since coming to power in 2010.

He is due to start picking his cabinet on Friday, the day after parliament debates the government pact, and have his team installed by the end of this month.

The coalition will have a more rightwing hue than the outgoing government of the VVD and the centre-left Labour party.

The independent budget office said the government’s plans would increase growth in gross domestic product (GDP) by 0.2 percentage points annually through 2021, with average growth forecast at 2 percent.

But despite being able to reap the benefits of the strongest Dutch economic expansion in a decade, at over 3 percent, the new government may struggle to promote its political agenda, given its wafer-thin, one-seat majority in both houses of parliament.

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Among the most important plans of the new coalition -- which comprises the VVD, the centrist D66 and conservative Christian parties CDA and Christian Union -- is a large tax overhaul, with a cut in income taxes worth around 6 billion euros ($7.1 billion) that will benefit the wealthy and middle classes.

The coalition also aims to lower the corporate tax rate, from 25 to 21 percent, which will be partly offset by higher taxes on food and a scaling-back of tax breaks for homeowners.

The largest employers’ association said the plans would make the Netherlands more attractive for international companies.

“The dividend tax is going to be totally abolished. That’s especially beneficial for foreign investors,” said Marcel Klok, a senior economist at ING bank.

Lowering taxes for households and companies will bring higher consumer spending and employment that will support the wider economy. “It is becoming more rewarding to work and that is one of the main aims of this government.”

However, labour unions said the plans would raise the cost of living, “while companies’ shareholders are being pampered”.

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The coalition does not include Wilders’ party and, while a greater focus on national identity is part of its agenda, a clampdown on migration is not.

The four parties have agreed to limit financial allowances for asylum seekers in the first two years of their stay, though the Netherlands plans to admit several hundred refugees per year more than until now.

Government plans also include higher taxes for polluters and the promise to shut all five coal-fired energy plants in the country by 2030. This should help lower emissions of carbon dioxide in 2030 to 49 percent of the level reached in 1990.

That goal seems unfeasible, environmental group Greenpeace said. “Coal plants will be allowed to run 10 years longer than necessary, while other plans to reduce emissions remain vague.”

A plan by D66 to extend euthanasia will not get the full support of the coalition since the CDA and Christian Union oppose the idea.

Additional reporting by Anthony Deutsch and Stephanie van den Berg; Editing by Gareth Jones