The outgoing secretary of state for taxation Marnix van Rij has come up with a proposal for an alternative to the current box three tax in the Dutch income tax. This alternative proposes a tax on savings and investments based on actual returns rather than on fictive returns. Peter Kavelaars, Professor of Fiscal Economy at Erasmus School of Economics, reacts on the proposal in an interview with het Financieele Dagblad (15 September).
The proposed capital gain tax will directly tax income from capital. Value gains on real estate and difficult-to-trade shares will only be taxed once these gains are materialized upon sale.
Good first step
The capital gain tax for real estate and difficult-to-trade shares is a good first step, according to the Professor. He therefore hopes that the next cabinet will use this capital gains tax for all assets in box 3. By doing so, the next cabinet would deviate from Van Rij's proposal. Van Rij’s proposal uses an accrual tax as default and an capital gains tax as the exemption.
The proposed new tax will not only tax the direct income from capital, but also the accrual of capital. The latter will mainly be relevant for exchange-traded shares. The reasoning is that the value of exchange traded shares is easy to determine, and shareholders can easily pay the imposed tax by selling part of their securities portfolio. Taxpayers will be able to offset losses in one year against gains in another.
Kavelaars refers to this as 'the epitome of economic disruption', while taxes should distort the economy as little as possible. The Professor explains that investors should sell shares based on economic motives and not to pay taxes over them. A common argument from banks and other financial institutions that they are not able to deliver the long-term data on changes in the value of shares is not credible, according to the Professor. He remarks that this is possible in other countries already.