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The Dutch coalition is heading for a serious clash over how the country taxes wealth, an issue known as Box 3, that has become one of the thorniest problems in Dutch politics. Leaked documents from the finance ministry, seen by broadcaster NOS, show that a rapid overhaul is back on the table, and the three governing parties do not agree on it.
What Box 3 is
In the Dutch income tax system, income is divided into three “boxes”. Box 3 covers the return people make on their assets, their savings, investments, shares and second homes. For years it has been a political headache. At the end of 2021, the Supreme Court ruled that the way the tax office calculated this tax, based on an assumed, notional return rather than what people actually earned, was unlawful.
Since then, a temporary system has been in place, one that is especially favourable to people with high returns, and which is already costing the treasury at least 2.4 billion euros a year in lost revenue. Finding a permanent replacement has defeated a succession of ministers.
The core disagreement: two ways to tax wealth
The current fight turns on a genuinely technical, but important, distinction between two methods.
One is a “capital growth tax” (vermogensaanwasbelasting). Under this, you pay tax every year on the gain your assets have made, even if that gain is still tied up in, say, shares you have not sold. The drawback is that people would have to pay tax annually on money they do not yet actually have in hand.
The other is a “capital gains tax” (vermogenswinstbelasting). Under this, you pay only at the moment you sell the shares or cryptocurrency and realise the profit. The drawback here is the opposite: people can simply postpone selling in order to put off, or avoid, the tax.
That difference is at the heart of the coalition row. The VVD is determined to introduce a capital gains tax on shares before the end of this year. Its coalition partners, the CDA and D66, do not want to.
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Why the coalition is split
The objection from D66 and the CDA is as much political as technical. A full capital gains tax would bring in somewhere between 11 and 25 billion euros less over the coming years than the alternative, partly because the tax is only collected when assets are sold. The two parties see no political support for freeing up billions of euros that would benefit wealthier people at the very moment the government is cutting spending on social security.
They are also mindful of the opposition. D66 and the CDA do not want to lose the support of the opposition party Pro, which in the budget negotiations has demanded that the tax on wealth be raised, not lowered. Finance Minister Eelco Heinen, of the VVD, had reportedly been close to a budget deal with two other opposition parties, JA21 and the SGP, which likewise want a capital gains tax on shares from 2028, before D66 and the CDA pulled him back. The tension ran so high that the coalition parties eventually decided to “park” the Box 3 question rather than resolve it.
Different accounts of what was agreed
The coalition parties now give different versions of what they actually decided. On one hand, it is said that a decision has been shelved. On the other, Minister Heinen said this week that he does still want to introduce the capital gains tax at an accelerated pace. “It’s possible,” he said, and “I’ve already made up my mind,” speaking after the weekly cabinet meeting.
That in itself is a shift. For years, successive ministers said it was simply not possible to introduce a capital gains tax at short notice, with the year 2032 once mentioned as realistic. According to the leaked assessments by finance ministry officials, it could in theory be done much sooner, but only if both houses of parliament approve the plan before the end of the year. Officials also warn of a serious practical drawback: in the first year, and possibly longer, the tax office would barely be able to check people’s tax returns, because its systems are not yet ready.
The opposition and the unions
The pressure is building from both directions outside the coalition. JA21 is pushing hard, saying it will only agree a budget deal if a wealth tax is introduced soon. “As far as we are concerned, capital growth tax is a thing of the past,” said JA21 MP Michiel Hoogeveen, calling it “a fundamentally unfair system”. From the other side, the left-wing Pro wants the leaked official documents made public as soon as possible, noting that during earlier debates parliament had been told a full capital gains tax would take years, and insisting that MPs be fully informed.
There is one point the coalition parties agree on: that unions and employers should be brought into a grand bargain linking Box 3 and social security. But the social partners say they have heard nothing about it. The employers’ organisation VNO-NCW said it was surprised, and the trade union FNV called it “fairly bizarre” that the cabinet was pointing to them. “It is up to the cabinet to work this out,” a spokesperson said, adding that one thing was clear for the union: “the budget must not come at the expense of social security. We will not accept that.”
What happens next
The dispute now feeds directly into the wider budget battle in the run-up to, and aftermath of, Prinsjesdag. For ordinary savers and investors, the outcome is important: it will determine how, and how soon, the returns on their savings and investments are taxed, after years of temporary fixes. For the minority government, it is one more issue on which it must find agreement not only among its own three parties, but with an opposition it depends on, and it is, for now, unresolved.