In the last week of last year the Supreme Court once again put a bomb on the savings tax: the taxation of savings and investments (box 3) is contrary to property rights and the prohibition of discrimination. Victims must therefore receive compensation from the tax authorities. According to tax experts who were proved right by the highest court in the Netherlands, it concerns billions.
But the question is who will get that compensation: only the people who had objected, or everyone who paid too much. In addition, more cases have been brought, which may require even more people to be compensated. For example, there is still a case pending at the European Court of Human Rights, and new procedures can also be started.
2013-2016: ‘4 percent get every sucker’
From 2013 to 2016, 1.2 percent tax had to be paid on all assets in excess of the tax-free portion. “The government assumed that “every loser” could achieve a 4 percent return on which 30 percent tax was levied. According to the adage of former ministers Zalm and Vermeend, that was a no-brainer,” says tax expert Cor Overduin of consultancy firm Grant Thornton.
At the time, Overduin established that the so-called capital yield tax was unfair. The government assumed a higher return on savings and investments than many people achieved, so that they had to pay more wealth tax than their capital yielded. At least tens of thousands objected to their tax bill. Overduin started proceedings against the Tax Authorities on behalf of the Taxpayers’ Association.
In the summer of 2019, the Supreme Court ruled that the capital yield tax until 2017 was in violation of the European Convention on Human Rights. Compensation was not discussed, Overduin: “Citizens were left empty-handed.”
human rights
That is why the Taxpayers’ Union went to the European Court of Human Rights. The file has been there for over 2 years now. “It will be an important ruling, but the Court keeps saying that it has not yet got around to it,” said Roxana Bos, partner of formal tax law at the consultancy firm EY, who brought the case to the Court.
If the Court rules that the savings tax is contrary to human rights, all victims will receive compensation for the years 2013 to 2016. This includes people who have not lodged an objection with the tax authorities. “Anyone who has achieved less than 1.2 percent return on capital can raise their hand,” says Overduin.
According to Overduin, this concerns at least 1.3 million savers who were disadvantaged by the then savings tax, which leads to a compensation of 700 million euros. And if all box 3 taxpayers are eligible for compensation, the price tag for the tax authorities will be more than 2 billion euros.
2017-2018: compensation
The savings tax has been as we know it since 2017: it is levied on a fictitious return that savers and investors earn on their assets. The government assumes that people with more assets also invest more and save less and achieve a higher return.
But the reality can turn out very differently than the models of the Tax Authorities assume: people save more at low interest rates or invest riskily, resulting in a loss. In those cases, more tax is paid than the capital yields. At least 60,000 people have objected to this.
And they were proved right by the Supreme Court last December. Moreover, in contrast to 2019, compensation was discussed. Those 60,000 are in any case eligible for that. The Ministry of Finance is still investigating whether this group can be expanded and whether it is possible to find out how much compensation should be paid to whom.
That is a time-consuming job, but according to Overduin, compensation for all affected savers is promising given the general compensation for victims of the allowance affair and gas extraction in Groningen. According to a calculation by Overduin, this will cost the government 200 million euros per year in 2017 and 2018.
2019 and beyond: still unknown
But it doesn’t stop there. Proceedings can still be started for 2019 and 2020. In any case, tax payers in box 3 advise taxpayers to object about the year 2021 and, if that is still possible, about 2019 and 2020. because you have had no or less return from the assets, it is not yet possible to say with full certainty,” says EY tax expert Bos.
The solution to the current savings tax is already contained in the coalition agreement: tax the assets on the basis of the actual return. But according to tax experts, that is not as simple as it seems. This reform of the savings tax is the responsibility of the intended State Secretary for Taxation, Marnix van Rij. The adjustment was planned for 2025, but MPs want it sooner. In the meantime, the tax-free capital will be increased from 50,000 euros to 80,000 euros.
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