Dutch government delays new plan to cover billions in Box 3 tax shortfall

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The Dutch government is expected to present a revised plan to fund its proposed changes to the Box 3 tax on income from assets later this month, according to multiple sources in The Hague. The Tweede Kamer, the lower house of Dutch parliament, had wanted an alternative before beginning its substantive debate on the tax plan on Monday, but the proposal will not be ready in time.

The coalition agreement is based on the Box 3 tax bill currently before the Dutch Senate. Under the proposed system, investors would pay tax on their actual returns from 2028, including unrealized gains on investments they have not sold. However, the coalition parties agreed during government formation talks that this form of taxation would eventually be abolished.

Right-wing parties, including the governing VVD, want to bring forward the change to 2028. This would leave the government facing a loss of billions of euros in tax revenue over the coming years. The coalition itself has yet to agree on how to cover the resulting shortfall.

The government initially wanted to cover part of the budget shortfall by sharply reducing the tax-free allowance for assets under Box 3. The move would have increased taxes for hundreds of thousands of savers and investors, but lawmakers rejected the proposal during a debate last week.

Finance Minister Eelco Heinen subsequently suggested reducing the tax on dividends paid to business owners by their own companies. The lower rate would encourage companies to distribute profits, boosting tax revenue in the short term. Over time, however, the measure would cost the government money and would not fully cover the budget shortfall.

A majority in the Tweede Kamer has called on the government to raise part of the necessary funds by limiting paper gifts, a tax arrangement that allows wealthy people to reduce the inheritance tax their heirs pay. The proposal, put forward by the ChristenUnie (CU), received support from coalition parties D66 and CDA but faced strong opposition from the VVD.

The proposed Box 3 changes are not the only point of contention in Parliament. The tax plan for next year also includes a substantial increase in the tax burden on workers, prompting criticism. The entire opposition supported PRO’s call for a “major change of course” this week. Lawmakers are scheduled to hold an extended committee debate on the tax plan on Monday.

Reporting by ANP