Coalition Divided on Wealth Tax
THE HAGUE, 02/04/14 - The government parties are divided over the wealth tax. Labour (PvdA) wants to raise this, but the conservatives (VVD) do not.
The matter will play out in The Hague in June. In that month, the Scientific Council for Government Policy (WRR) will publish a study of inequality of wealth, its consequences and how the cabinet can deal with this.
The Netherlands is characterised by relatively small income inequality but large wealth disparity. This is increased in the past 15 years to such an extent that 1 percent of households own 25 percent of total assets.
The cabinet will also release its reactions to the Van Dijkhuizen Commission’s proposals in June or July. This commission last year advised a reduction in the present tax.
This tax is 30 percent of a fictive yield on capital of 4 percent, equivalent to 1.2 percent of wealth above a threshold. Finance Minister Jeroen Dijsselbloem and PvdA party leader Diederik Samsom want to raise this tax and to use the proceeds to reduce income tax.
The VVD is however against a higher wealth tax. And the coalition-friendly small Christian opposition parties, ChristenUnie and SGP, actually want a lower tax. This is also the position of consultants Grant Thornton, which this week announced it was launching a court case against the 1.2 percent rate, as nobody can currently make 4 percent on savings.
Centre-left D66 leader Alexander Pechtold recently became the first to urge a lower tax on work, whenever there was some room for this in the budget. This is backed by Dijsselbloem and Samsom in the sense that they consider there should be a tradeoff here against a higher wealth tax. They have not specified the form in which this should be cast.
SGP MP Elbert Dijkgraaf says the 4 percent yield basis encourages people to invest their money more riskily than they actually want to do. “It is also more likely to lead to capital flight to countries with a more favourable regime, while we sorely need the capital in the Netherlands.”
Dijkgraaf also says the banks’ buffers will improve if people put more money on savings accounts. “We would therefore rather lower the tax on capital. Assuming a realistic yield that people can realise appears to us to be the fairest idea”
ChristenUnie MP Carola Schouten has backed the VVD and SGP. She believes that despite the gradual disappearance of banking secrecy in European countries, people with a large amount of assets will still continue to find escape routes. “Then it rebounds on the small savers, after all.”