Finance Min. pushed to again adjust Box 3 tax plans only 48 hours after presenting them

The Tweede Kamer, the lower house of the Dutch parliament, has shot down the government’s plan to tax small savers and investors in Box 3. So, only two days after the Cabinet presented its new plans to fund this headache dossier, it is back to the drawing board for Finance Minister Eelco Heinen (VVD), Trouw reported after the second day of the parliamentary debate on government finances.

The Supreme Court has been demanding since 2021 that the Cabinet introduce a fairer wealth tax system, taxing actual returns on savings and investments instead of a fictitious return. Yet successive Cabinets have failed to do so, and that is costing the treasury billions in revenue per year.

On Tuesday, Prime Minister Rob Jetten and Finance Minister Eelco Heinen announced plans to adjust the Box 3 tax as early as 2028. To fund their plans, the government wants to halve the tax-free asset allowance from approximately €60,000 to just over €30,000. That means that people who earn as little as €1,000 in interest annually would suddenly be subjected to tax on their savings and investments, affecting around 850,000 people.

Parliament rejected this idea, demanding that the government restore the tax-free allowance to the €1,800 per year interest stipulated in the previous legislative proposal. Heinen agreed, but warned that finding an alternative that would yield an equivalent amount would be “enormously complicated.”

The other part of the funding plan also turned out to rest on shaky ground. The government wanted to source funds from Box 2, where major shareholders of private limited companies pay their taxes. Heinen wants to temporarily decrease this tax rate to entice shareholders to withdraw dividends from their companies sooner, generating a temporary boost in tax revenue for the treasury.

PRO MP Luc Stultiens called this a “gift” to the wealthy and a “bogus funding measure.” According to the left-wing MP, the data shows that this measure would actually increase the national debt in the long run.

So it is back to square one for Heinen. He said that he and State Secretary Eelco Eerenberg (Taxation and Benefits) will again be working “late into the night” in the coming weeks to devise a better funding plan for the Box 3 reform.