Reforming asset tax system is an ‘enormous’ task, says minister

Amending current asset tax legislation following a court ruling which said the present system breaks EU law is an ‘enormous’ operation which requires time, tax minister Marnix van Rij told MPs ahead of Wednesday’s debate.

Taking decisions too quickly carries ‘too great a risk of making mistakes’, Van Rij said. Nor, he said, would there be enough time to fully involve parliament in the decision-making process.

On Wednesday MPs are due to debate the asset tax debacle, which is likely to cost the government billions of euros in refunds and delays.

The Supreme Court said at the end of November that the tax on assets included in box 3, such as savings and investments, conflicted with European human rights treaties.

At the moment all assets apart from own homes are placed in ‘box 3’ and taxed according to a fictional rate of income that the state believes these assets will be generating.

Currently the tax office presumes that people with €50,000 in assets have invested a third of it, and 79% of it if they have up to €1m. The asset tax is based on a fictional return of 0.03% on savings and 5.69% on investments.

The tax currently generates around €4bn a year for the treasury.

Reforms

The new government has pledged to change the asset tax system for one based on actual returns from 2025.  But Van Rij has also warned parliament that if the reforms are too complicated, the tax office’s aging IT system will not be able to cope.

Left wing opposition MPs are calling for a system based on a flat tax rate on savings and assets.

The Labour party, GroenLinks and SP have submitted a joint proposal calling for a flat rate tax of 1% on assets of between €100,000 and €500,000, rising in stages to a 5% tax on assets of more than €5m, excluding your own home.