Cabinet backtracks on box 3 tax plans for small savings

The Dutch cabinet has agreed to modify its new tax plan for savings and investments, just two days after unveiling it, to shield more people with modest savings from higher taxes. Finance Minister Eelco Heinen, of the right-wing liberal VVD party, confirmed this in parliament on Thursday following criticism from opposition and coalition MPs.

He stated that the government is prepared to make changes and issue a proposal to spare small savers from the impending tax increase. Under the initial plan presented on Tuesday, savers would face a 36% tax on returns exceeding €1,000 annually, starting in 2028, a decrease from the previous threshold of €1,800. Heinen also reiterated his belief that the plan would exempt couples with savings up to €100,000.

However, he has yet to determine how the cabinet will cover the financial gap, as small savers were the primary funding source for this tax overhaul, with projected costs of up to €20 billion. The government will present the bill to the Council of State, the chief advisory body on legislation, without an alternative funding source.

Heinen announced that he would submit proposals by October 12, when MPs will debate the cabinet’s annual tax changes. Additionally, he hinted at considering a temporary measure for next year, which would lower the tax-free allowance from €59,357 to €30,846 per person and raise the tax rate.