Cabinet pushes ahead with Box 3 asset tax reform despite criticism

The Dutch Cabinet is moving forward with its proposal for a new Box 3 Asset Tax, which taxes investments and savings, despite significant objections from the Raad van State (Council of State). The plan, spearheaded by State Secretary for Finance Tjebbe van Oostenbruggen, aims to tax actual returns on assets rather than a fixed rate, which was declared unlawful by the Hoge Raad in 2021.

“I see no other viable route,” Van Oostenbruggen said. “Ultimately, you must choose the least harmful option, and that is exactly what I am doing.”

The proposed system would levy taxes on actual earnings from savings and investments, replacing the previous system that taxed a presumed fixed return. Under the plan, most investments would fall under a "wealth growth tax," taxing unrealized value increases. Real estate and start-up shares, however, would be subject to a "realized capital gains tax."

The reform addresses the 2021 Hoge Raad (the Supreme Court) ruling that deemed the old fixed-return tax system in box 3 inequitable. This ruling spurred a political consensus to create a fairer system that reflects actual asset performance.

The Council of State, the government’s top advisory body, issued a highly critical report in December 2023, identifying "major objections" to the Cabinet’s plan and recommending a complete reevaluation. Despite this, Van Oostenbruggen believes the current proposal remains the best available option.

“The objections raised have largely been addressed,” Van Oostenbruggen stated. “I think we can adequately respond to most concerns.”

Van Oostenbruggen said the Cabinet has added extensive clarifications to the proposal and ensured that the IT infrastructure at the Belastingdienst can handle the implementation. He plans to present the updated reform plan to the Tweede Kamer on Thursday.