Dutch wealth distribution more skewed than thought; Richest 1 percent hold 26% of wealth

The distribution of wealth in the Netherlands is "more skewed than expected," according to a study commissioned by the Cabinet. The richest one percent of Dutch households own 26 percent of total wealth, the study showed. On the other hand, a quarter of households carry debt.

The fact that wealth inequality exists in the Netherlands was not unknown, but the wealth of the richest households was especially underestimated at first, according to the researchers. A "substantial interest" in a business, in which a person holds at least 5 percent of the shares of a company, was not fully included in prior research. The wealthiest 1 percent own no less than 75 percent of all substantial business interests in the Netherlands. For them, this interest constitutes 60 percent of their total assets.

Moreover, wealth inequality is growing due to the current fiscal policy of the government. The wealthiest 1 percent experience "a lower average tax burden," according to the researchers, as the tax on wealth is much lower than that on work.

Inheritance and gift tax also contribute to wealth inequality, mainly through the "business succession scheme" (BOR). Under this scheme, intended to be able to ensure the continuation of businesses, people pay much less tax than with inheritances or gifts that do not make use of BOR. In addition, wealthy people can more easily take advantage of favorable tax structures, and they more often have the means to obtain advice on this matter.

When wealth distribution is too skewed, it can be harmful to the economy and society, the researchers warn. In their view, a great deal of wealth more often leads to economic or political power, which in turn leads to more flexible policies regarding wealth accumulation, they said as an example..

According to the investigation committee, led by economist Laura van Geest, the Cabinet can address the issue several ways, such as by adjusting the gift and inheritance tax, or by taxing the equity value of homes differently. The government can also level out the taxes on work and wealth. In the short term, something can also be done about inequality within the current tax system, but according to the researchers, "part of the problem is inherent" in the current system that places different forms of income and assets in different tax boxes.

The Cabinet had asked for the interdepartmental policy study to be carried out. In August, prior to Budget Day, the Cabinet will consider what it can do to reduce wealth inequality. Prime Minister Mark Rutte said on Friday that it will probably take several years to tackle wealth inequality, but that he "wants to see what works."

According to Social Affairs Minister Karien van Gennip, the lopsided distribution of wealth is "an insight from which we must learn something."