The government's proposed new box 3 system needs to be scrapped, the Council of State advises. The proposal has too far-reaching consequences for citizens and the Tax Administration. It will lead to poorer service, limited opportunities for pre-consultation with a tax inspector and insufficient supervision. What is the issue?
Content and background of the bill
With the Bill on actual returns in box 3, the government wants to introduce a new system within income tax for the taxation of income from savings and investments in box 3. Under the current system, tax in box 3 is levied on the basis of lump-sum returns. The Supreme Court has ruled that this flat-rate system is not in line with the European Convention on Human Rights. Therefore, the government is proposing to levy tax based on actual returns. A capital gains tax is proposed as the main rule. As an exception, a capital gains tax is proposed for real estate and shares in start-ups. In addition, a flat-rate approach, known as net property addition, is adopted for regular gains from property that is not rented out for the whole year.
Interaction of legislature, courts and implementation
In its opinion, the State Council's Advisory Division discusses the interplay between legislators, courts and implementation. They have to find the right balance in mutual interaction each time. They have all fulfilled their roles, but a stalemate seems to have arisen. Against this background, the Advisory Division makes its comments.
Integral view on taxing wealth lacking
The Advisory Division notes the lack of a comprehensive view on taxing wealth. This is necessary to make a well-considered choice for a new box 3 system. It recommends paying attention to the contribution the proceeds from box 3 should make to the tax mix. It also addresses the lack of coherence between the boxes in the way in which assets are taxed.
Budget neutrality
The government uses the principle of budget neutrality in the proposal. This means that the new box 3 system must generate the same revenue as the current system within the period 2027-2032, without taking into account the costs of the legal recovery. Strict adherence to this principle hampers a careful and integral weighing up of the various interests at stake in the design of a new box 3 system. In the opinion of the Advisory Division, legality must come first. In addition, practicability, the 'doability' of taxpayers, the simplicity of the new system and the achievement of a budgetary yield play an important role.
Alternative schools of thought
Because of the weighty objections, it advises the government to reconsider the design of the box 3 system. The Advisory Division points out some possible alternative schools of thought for the design. It discusses the remaining scope for a flat-rate box 3 system and the possibility of a capital gains tax. It also outlines possible ways of achieving additional budget revenue. The Division recommends that the government consider these schools of thought when redesigning the box 3 system and weigh up the pros and cons of the various variants.
Tip: Read here The entire opinion of the State Council's Advisory Division.
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