‘The poor should benefit from lower interest rates too’

annemarie van gaalPeople are paying crippling interest rates on their debts with banks and mail order companies. If the wealthy can persuade the government to lower the tax on wealth then the poor should benefit from lower interest rates too, writes Annemarie van Gaal.

The Dutch are a frugal lot and for quite a while our savings have been a nice little earner for the state. For the last 15 years it has been assuming that the return on your savings is a nicely taxable 4%.

No saver and hardly any investor has achieved this result in the last few years and even the supreme court called the taxed 4% return ‘an exorbitantly heavy burden on savers’.

With a historically low interest rate and a negative interest rate looming on the horizon, the lobby started by the wealthy part of the nation looks as if it will be successful in convincing the government to change the tax on wealth to a more realistic level. No longer would wealth tax be a tax on ‘what could have been’ but a tax on returns that have actually materialised, a much fairer state of affairs.

Far less easy

The wealthy know how to stand up for themselves. I want to talk about the people who have a far less easy time of it: families in debt, without any savings whatsoever. Filming a new series of the RLT4 programme Een dubbeltje op zijn kant (Penny-wise, DN), I once again find myself confronted with sad stories of people heavily in debt with banks, mail order companies and credit companies.

Debt is expensive. Every family pays an average interest and cost of 15% to 25% on top of the amount owed. They may have accepted their bank’s generous offer of paying their debt in instalments using a credit card. It sounds pretty good, and it is for the banks, at an interest rate of 14%.

Outstanding

Added to the yearly costs, this means another outstanding cost which can go up to as much as 25% of the amount owed. Mail order companies allow for payment in instalments but at Wehkamp, for instance, customers are looking at a 14% interest rate and a minimum of €8 paid into your personal ‘balance sheet account’.

14% is outrageous of course, but it is within the confines of the law. Years ago credit lenders were allowed to put a top-up of up to 12% on the legal interest rate. The legal interest rate is at 2% at the moment so 14% is allowed and applied almost across the board.

Over the top

That 12% may have been appropriate then but is now completely over the top, especially compared to what banks themselves pay to attract money or the interest rate they are giving to savers.

If we lower the tax on wealth to a more realistic level, why can’t banks and mail order companies not adapt their interest rates to help people pay off their debts? Who will make the first move? Just see it as doing a good deed for the less well-off in our society.

Annemarie van Gaal is an investor and entrepreneur

This article appeared earlier in the Financieele Dagblad