The Dutch government has scrapped plans to implement a wealth tax on investors after a fierce backlash from critics who branded the idea ‘insane’.
Prime Minister Rob Jetten wanted to tax increases in the value of shares, bonds and cryptocurrencies before investors had actually sold them.
These are known as ‘unrealised gains’ – a profit that exists only on paper because the asset has risen in value but has not been sold.
For example, if an investor bought shares worth £10,000 and their value later climbed to £15,000, they would have made a paper gain of £5,000.
Under the original proposal, they could have faced a tax bill on that gain despite not having sold the shares or received any cash.
Critics warned the system could leave some investors with no choice but to sell assets to pay tax bills on profits they had not actually pocketed.
Instead, the Dutch government will introduce a more conventional capital gains tax, under which investors pay tax only when they sell an asset and bank a profit. These are known as realised gains. The tax rate will be set at 36 per cent.
The policy U-turn is expected to cost the government around €15billion (£13billion) over the next eight years.
Ministers hope to make up some of the shortfall by cutting the tax-free allowance on investment gains from €1,800 to €1,000, bringing more small investors into the tax net.
Prime Minister Rob Jetten has abandoned plans to tax increases in the value of shares, bonds and cryptocurrencies before investors had actually sold them
In a letter to MPs, Mr Jetten said the government had listened to concerns raised in parliament and wanted to protect the Netherlands’ attractiveness as a place to invest.
The original proposal attracted criticism from investors around the world, some of whom labelled it ‘the dumbest thing any government on planet Earth is pursuing right now’.
Tesla boss Elon Musk was among those who amplified attacks on the policy.
Under the revised plans, a standard capital gains tax will be introduced on shares, bonds and second homes from 2028, with cryptocurrencies and foreign currency gains due to be included from 2030.
The government’s climbdown comes amid a wider debate across Europe over wealth taxes, with several Left-wing parties pushing for higher taxes on wealthy individuals and investors.
The dispute stems from a 2021 Supreme Court ruling that struck down the Netherlands’ previous system for taxing wealth. Under the old regime, investors were taxed using assumed returns rather than their actual profits.
Around 2.5 million of the country’s 9.7 million taxpayers were paying the levy, prompting the government to look for a replacement system.
Ministers initially proposed taxing individual gains, whether investors had sold their assets or not, before abandoning the idea following the backlash.
However, the changes are not guaranteed to become law because Mr Jetten’s coalition does not command a majority in parliament.
Some opposition parties have already voiced concerns that reducing the tax-free allowance could hit ordinary savers and investors rather than just the wealthy.
Meanwhile, investors have increasingly raised concerns about France’s worsening debt problems, with one analyst describing the country as ‘the new sick man of Europe’ as borrowing costs continue to climb.