Tuesday 26 May 2020

Tax on savings places ‘excessive burden’ on savers, court rules

Photo: Depositphotos.com

The tax on savings which was introduced in 2001 is unfair and could lead to people paying too much, the Dutch Supreme Court said on Friday.

The asset tax assumes people in earn interest on their savings and they have to pay 30% tax over that fictitious amount. In practice, however, the interest on savings is far less and in some cases people’s savings are actually going down because of the tax.

Dutch taxpayers lobby group BvB took the issue to court, focusing the case on a number of tax returns from 2013 and 2014 when the assumed increase was 4%.

The court on Friday said it partly shared the lobby group’s concerns. Generating a 4% return in 2013 and 2014 was not possible without taking a lot of risks, the court said.

If the actual return on risk-free investments such as savings accounts and state bonds is lower than the amount paid in tax, then the state is placing an ‘excessively heavy burden’ on taxpayers, the court said.

The state, the court said, would have to compensate taxpayers for their losses, but did not say how this should happen.

Tax expert Arjo van Eijsden said taxpayers should not automatically except their money back. ‘Every taxpayer will have to show that the tax has placed an excessive burden on them,’ he told the AD.

The tax on savings currently generates €4bn to €5bn a year for the treasury.

Reforms

Tax minister Menno Snel said in April the cabinet is looking into ways of cutting the amount of tax paid by people whose assets are primarily in the form of savings

One option would be to levy tax based on the actual interest earned on savings, while continuing to tax property and other investments at the fictitious rates, Snel told MPs. Snel says he hopes to present the plans to parliament along with the rest of the budget in September.

The system was first amended int 2017 to introduce three different tax rates based on how much individuals had in the way of savings.

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