Finance Min. surprised coalition, officials with plans to change new Box 3 tax: Report

Finance Minister Eelco Heinen (VVD) surprised the coalition parties and his own civil servants when he suddenly announced last month that the long-debated bill for the new Box 3 tax system would go “back to the drawing board.” He also bypassed State Secretary Eelco Eerenbaerg (D66), who is responsible for the wealth and assets tax, 26 sources in and around the Cabinet told NRC. Heinen said Friday he will provide more clarity regarding the issue on Prinsjesdag, the date in September when the Cabinet reveals its budget proposal for the following calendar year.

According to the sources, Heinen had spoken to a group of civil servants and State Secretary Eerenberg about his desire to amend the law. But there was no agreement on how to do it, and the coalition did not know that Heinen, who does not have taxes in his portfolio, would announce the bill’s withdrawal. The Tweede Kamer, the lower house of the Dutch parliament, had passed the bill, after over two years of work and debate, not even two weeks earlier.

The reason Heinen announced that the bill would be amended was the “broad uproar” that had arisen “over the perceived consequences of the law, both domestically and internationally,” Heinen told NRC. His spokesperson added: “It was therefore not certain that the law would pass the Senate. This could have major budgetary consequences, for which he is responsible.”

The “broad uproar” Heinen was referring to was weeks of criticism from investors, foreign billionaires, and the Dutch startup sector about the new law’s tax on unrealized gains. That means that investors in stocks, cryptocurrencies, and bonds would pay tax on the increase in value of their assets, even if they haven’t cashed them out yet.

Critics argued that it would force people to sell some of their assets to pay the tax on money they don’t have. The law includes an exception for less easily tradable assets, such as real estate, which would be taxed on profits once the assets are sold. There is also an exception for startups.

Startup organization Techleap warned that startups would avoid the Netherlands and the new law would deter investors. The Washington Post, owned by multibillionaire Jeff Bezos, wrote that the Netherlands was ruining its financial reputation with “one of the most aggressive wealth taxes in the world.” Elon Musk also liked a post calling the law “insane.”

These concerns forced Heinen to intervene, he said. In the week leading up thte Cabinet change, in which Heinen kept his job as Finance Minister, he began looking into the dossier, NRC’s sources said. He wanted to hear from civil servants how the law could be amended. And last week, he announced that the law was “going back to the drawing board.”

Exactly what changes Heinen is planning and how long they will take remain unclear. The law was set to be implemented in 2028.

Part of the reason parliament passed the bill in the first place was that not having a new system for taxing assets and wealth in place was costing the government billions of euros a year.

The government had to replace the Box 3 tax after successive courts ruled it unlawful. In the meantime, the Tax Authority is taxing assets in Box 3 on a fictitious return. If the actual return is higher, asset holders don’t have to pay more tax. But if the return is lower, they can claim a refund. This system is costing the treasury approximately €2.3 billion per year.

Before the regular weekly Cabinet meeting on Friday, Heinen told reporters he was not aware of any coalition partners being shocked or surprised, such as how NRC portrayed the situation. There were concerns about “financial unrest,” which he mitigated, he claimed.

Apart from that, none of the changes proposed will take effect before 2028, and in any case, there is not enough political support in Parliament, particularly the Eerste Kamer, to approve his predecessor’s plan, he continued. Heinen said that he will provide more details about how his changes will affect the State’s finances by Prinsjesdag.