Remittances paid to the Dutch state by Dutch aerospace companies
Dutch aerospace companies pay the Dutch state a certain percentage of the turnover they earn from JSF-related production and maintenance contracts. By doing so, they defray part of the cost incurred by the state in investing in the development and production of the JSF. But what is the value of these remittances and how are they calculated?
Original agreement dating back to 2002
In 2002, the Dutch government signed a cofinancing agreement with the Dutch aerospace industry, under which the aerospace companies agreed to pay the state 3.5% of the turnover they earned from JSF-related production and maintenance contracts. Companies are not required to pay any remittances on turnover earned from development work. The first remittances were made in 2008.
2010: Agreement adjusted after court ruling
After representatives of the Dutch aerospace industry went to court in 2008 to apply for a revision of the percentage on which the remittances were based, the state and the aerospace industry amended the terms of the agreement in 2010. Under the new agreement, aerospace companies were required to remit 2% of their JSF-related production turnover to the state, instead of 3.5%. Although the percentage was lowered, it now also applied to turnover earned from the production of spare parts and the maintenance of aircraft for the Royal Netherlands Air Force. It was also agreed that the percentage would start at 2%, but then rise to 2.7% of turnover earned in 2018, 3.4% of turnover earned in 2019 and 4.1% of turnover earned in 2020 and the following years. The new agreement was to apply to the period from 2008 to 31 December 2052.
New arrangement agreed in 2015
At the end of 2014, representatives of the Dutch aerospace industry claimed that the new agreement, i.e. for a gradual rise in the percentage on which the remittances were based, would undermine their ability to compete for orders. The government again made a new arrangement with the aerospace industry in order to meet these objections:
- the total amount that the aerospace industry is required to remit to the state remains the same, at €105 million (in 2001 prices, net present value);
- the percentage on which the remittances are based will not be raised, but will remain at 2%;
- the turnover on which the remittances are based will be extended. Eligible turnover will include not only turnover earned from production and maintenance, but all turnover earned from work classified as ‘JSF maintenance and sustainment’. This had previously been limited to turnover earned from the production of spare parts and aircraft maintenance for the Royal Netherlands Air Force.
In other words, payment of the sum of €105 million will now be spread out over a longer period, which will not end until 2062.
The government has agreed to reassess the situation, first in 2020 and then again in 2030, to see whether aerospace companies have made sufficient remittances as to enable the percentage to be lowered. The underlying requirement remains that aerospace companies remit a total of €105 million (net present value, 2001 prices) to the state.
How the remittances are calculated
The Dutch government formulated a business case in 2002 that involved calculating the additional costs incurred by its participation in the JSF programme. At that time, the Netherlands was only committed to taking part in the SDD phase. Working on the assumption that the Netherlands would invest USD 800 million and receive benefits in the form of royalties and discounts on the price of the JSF, the additional cost incurred by the state was calculated at €157 million:
|Amount to be paid by the Ministry of Defence||€ 26 million|
|Amount to be paid by the Ministry of Economic Affairs||€ 26 million|
|Remittances to be made by aerospace companies||€105 million|
The business case was also based on an assumption that the Netherlands would buy 85 JSFs. In the event, the actual number purchased was much lower (37 aircraft, under a government decision in 2013). It was also not known at the time that the Netherlands would invest in later phases of the JSF programme.
The business case took the net present value << net present value: link naar 6000: Glossary>> as its starting point. This term is explained in the glossary elsewhere in this website. It means that, ultimately, the remittances made by Dutch aerospace companies will be worth more than €105 million. This is because the state receives the remittances in small instalments.
The figures have been calculated in 2001 prices. This term is explained in the glossary elsewhere in this website. The ministries and the aerospace industry still need to convert the figures into current prices. For example, €26 million in 2001 prices is equivalent to €41.4 million in 2010 prices.
Current status of remittances
The progress reports published by the Minister of Economic Affairs and Climate Policy state the value of the remittances received by the state from Dutch aerospace companies during the past year. The remittances are based on the turnover earned during the year before. The turnover figures are audited by the National Audit Service.