Court ruling means Dutch State will have to return €4 billion in capital gains taxes

The Supreme Court’s ruling that the Netherlands must compensate savings holders and investors for paying too much in capital gains taxes will cost approximately 4 billion euros, outgoing Finance State Secretary Marnix van Rij told ANP on his way into the weekly Council of Ministers meeting. The big hit to the national treasury will also seriously impact the incoming coalition government when they take office, he said.

On Thursday, the Supreme Court ruled that the Netherlands used a discriminatory method of calculating the tax on capital returns in Box 3, which includes gains earned on certain levels of savings and investments in the stock market and real estate. Between 2017 and 2022, the government taxed Box 3 assets based on a fictive return that was often much higher than the actual returns taxpayers earned.

The government tried to fix it with the Box 3 Restoration Act, but it did not have the desired effect. The Supreme Court ordered the government to compensate savers and investors for too high taxes paid in that period.

On Friday, Van Rij called an amount of 4 billion euros “fairly accurate” for that compensation. A new Box 3 tax system, consisting of a mix of capital gains and capital growth tax, must take effect in 2027. The costs of the Supreme Court’s ruling between 2023 and then will depend on developments in the stock exchange, according to the news wire.

Van Rij said that the new PVV, VVD, NSC and BBB political coalition knew about this possible setback when discussing their coalition agreement. The Ministry of Finance sent the formation parties a list of potential setbacks, which included that the Box 3 issue “could amount to several billions” in the period up to the introduction of the new system.

However, the four parties did not take it into account when composing their outline agreement and political agenda. On Thursday, Van Rij told the Financieele Dagblad that allowing the national debt to “increase slightly” would be the best way to absorb the billions-setback resulting from the Supreme Court ruling.

“I’m not responsible for it anymore, but that is what I would advise my successor,” he said. But then on Friday, De Nederlandsche Bank said in its latest economic forecast that the new right-wing coalition’s plans would already increase the government deficit. The central bank believes this alone will already bring deficit levels above the EU standard next year, even without taking the Box 3 ruling into account.