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Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

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Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#71

Post by itake »

clickety_clack wrote: post #42

About a year ago, Draghi released this report on European Competitiveness ( https://commission.europa.eu/topics/competitiveness/draghi-r... ). In it he says "A key reason for less efficient financial intermediation in Europe is that capital markets remain fragmented and flows of savings into capital markets are lower." I don't have data readily to hand (and Draghi probably mentions this in the report, I can't remembe…

> Europeans basically keep their savings in bank savings accounts.

USA is not much different. The wealthiest 10% of the U.S. population holds the vast majority of stock market wealth. Recent data shows this group owns around 90-93% of all stocks, with the top 1% controlling about half of the total household equity.

Many people hold cash in savings to prepare buying a house, paying for a child's college and more. IMHO, there is also less short-term need to invest your money as an adult.

If you're happy with your job and don't need the extra money (or risk), then why invest in the stock market?

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#72

Post by jmyeet »

temp2441139 wrote: post #37
jmyeet wrote: post #11

Good. IMHO unrealized gains and profit shifting are two of the biggest problems in modern taxation that need to be addressed. Many people will have heard about the Buy Borrow Die strategy by now. In case not, it's basically where you don't sell an asset (and thus have to pay taxes on the gain). You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than…

> This is a massive tax break for the wealthy. Do you have a reference for this? Any sort of gift or inheritance transfers the cost basis as far as I know.

Um, I don't know what information you're getting but this is easily Googleable eg [1]:

> The tax basis of property acquired by a beneficiary from someone who dies is ordinarily the property's fair market value at the date of the decedent's death.

[1]: https://www.fidelity.com/learning-center/personal-finance/wh...

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#73

Post by jmyeet »

SilverElfin wrote: post #64
jmyeet wrote: post #11

Good. IMHO unrealized gains and profit shifting are two of the biggest problems in modern taxation that need to be addressed. Many people will have heard about the Buy Borrow Die strategy by now. In case not, it's basically where you don't sell an asset (and thus have to pay taxes on the gain). You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than…

> IMHO borrowing money against an asset should be realizing a gain and borrowing against foreign profits should be repatriating those profits. Why is this necessary when the spending of the borrowed money is itself taxed?

You only pay sales and consumption taxes when you spend borrowed money. You're not paying any income or capital gains taxes on it.

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#74

Post by jmyeet »

staticassertion wrote: post #60
jmyeet wrote: post #11

Good. IMHO unrealized gains and profit shifting are two of the biggest problems in modern taxation that need to be addressed. Many people will have heard about the Buy Borrow Die strategy by now. In case not, it's basically where you don't sell an asset (and thus have to pay taxes on the gain). You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than…

> You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than the interest rate. Gosh, that hopefully is doing a lot for you sentence lol. Risk based economies function on that "hopefully". To phrase this another way, "if you borrow money against an asset, invest it in the economy, and make more than the interest in returns, you can avoid selling the ass…

Let me quote from my own comment:

> What's particularly gross about this is that many asets in many countries can be inherited by children on what's called a stepped up basis, meaning the base value for determining any capital gains taxes resets to the current market value when the owner dies. This is a massive tax break for the wealthy.

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#75

Post by staticassertion »

jmyeet wrote: post #74
staticassertion wrote: post #60

Earlier quoted context omitted.

> You use it as collateral for a loan and just spend the laon while the asset continues to appreciate (hopefully) faster than the interest rate. Gosh, that hopefully is doing a lot for you sentence lol. Risk based economies function on that "hopefully". To phrase this another way, "if you borrow money against an asset, invest it in the economy, and make more than the interest in returns, you can avoid selling the ass…

Let me quote from my own comment: > What's particularly gross about this is that many asets in many countries can be inherited by children on what's called a stepped up basis, meaning the base value for determining any capital gains taxes resets to the current market value when the owner dies. This is a massive tax break for the wealthy.

Right, I read your comment. You still clearly state that this is a loophole and when you then follow up to say "particularly gross" the clear implication is that it's a "gross loophole".

The ability to borrow against an asset is not a loophole.

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#76

Post by ivankra »

askmike wrote: post #31

To summarize the current Dutch personal income system: besides income from salary and income from own business (these are taxed quite high), income from investments (stocks, passive investments, real estate excluding your first home) is taxed quite low. The amount is simply a percentage based on the value (as per the start of the year) of your investments. So in the Dutch tax system there is no difference between rea…

It is essentially a wealth tax system. But I wouldn't call it low: currently, 6.17% fictional yield x 32% tax rate = 2% wealth tax rate - it is at the high end among countries with a wealth tax (https://en.wikipedia.org/wiki/Wealth_tax)

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#77

Post by clickety_clack »

itake wrote: post #71
clickety_clack wrote: post #42

About a year ago, Draghi released this report on European Competitiveness ( https://commission.europa.eu/topics/competitiveness/draghi-r... ). In it he says "A key reason for less efficient financial intermediation in Europe is that capital markets remain fragmented and flows of savings into capital markets are lower." I don't have data readily to hand (and Draghi probably mentions this in the report, I can't remembe…

> Europeans basically keep their savings in bank savings accounts. USA is not much different. The wealthiest 10% of the U.S. population holds the vast majority of stock market wealth. Recent data shows this group owns around 90-93% of all stocks, with the top 1% controlling about half of the total household equity. Many people hold cash in savings to prepare buying a house, paying for a child's college and more. IMHO…

That’s exactly the issue, there’s so many taxes and frictions that people don’t think it is worth it, and that’s one of the reasons why Europe is stagnating. Investment in business creates strong economies.

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#79

Post by toast0 »

ivankra wrote: post #29
tschellenbach wrote: post #6

The title here mostly doesn't match the article right? Quote: "But unlike the capital growth tax, capital gains tax will, in principle, only be levied at the time of realisation. This is usually when the relevant asset is sold, but also when immovable property exits Box 3 for another reason, such as emigration."

Looks like they're coining a new legal term "Capital Growth Tax", under which they are going to tax unrealized capital gains. I'm not aware of any other country that taxes them like that (besides wealth/exit taxes), so maybe they're the world's first here! Some countries have wealth taxes - but they are usually flat or scale with wealth, not the yearly increase in wealth. Note that currently NL does de facto have a w…

I think there are some other jurisdictions that require Mark to Market for tax purposes, at least in some situations.

In the US, certain traders can elect to mark to market [1].

[1] https://www.irs.gov/taxtopics/tc429

Re: Netherlands – Capital Growth Tax and Capital Gains Tax for Box 3

#80

Post by archagon »

abtinf wrote: post #50

It is difficult to imagine a more catastrophically destructive economic policy. If this is actually implemented, the Dutch are toast.

The Netherlands has had a form of "Box 3" wealth/unrealized capital gains tax for years. (This is just an update to existing policy.) So far, the country has not imploded.

Time to update your priors.

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