In an opinion article in NRC (4 February 2022), Bas Jacobs, Professor of Public Economics at Erasmus School of Economics, and Sijbren Cnossen, tax expert and Emeritus Professor at Erasmus School of Economics, explain what steps should be taken now the tax authorities will not impose capital gains taxes in box 3.
Consequences of this verdict
Due to the Supreme Courts’ verdict, currently no tax on capital gain is being levied. This will lead to a gap in the Dutch’ treasury of an estimated five billion euro per year. However, this is most likely an underestimation, citizens may utilise this arbitrage opportunity to shift wealth from other boxes to box 3 to evade taxation. This discontinued capital gains tax system is based on fictional returns. This means that most savers were paying too many taxes over their capital gains, especially with the currently low interest level. In the meanwhile, wealthier people who invested their wealth in stocks and real estate, were paying too little taxes on capital gains.
New capital taxation system
Jacobs and Cnossen argue that the government should work towards a capital gains tax system of taxing the real capital gains instead of taxing fictional capital gains. These capital gains should be taxed with a uniform tariff. Apart from political reasons, taxing real capital gains will be enhancing for the economy since it will have an anticyclical effect on the economy.
However, implementing a new capital taxation system may take longer than we think. To bridge the time gap until this new system is ready, the government should utilise the current capital taxation system as a withholding tax, which can later be deducted from the taxes that citizens should have paid according to the real capital gains.