Dutch tax on unrealized gains exposes the conflict between the government and investors

The Dutch government’s proposal to tax unrealized capital gains has become one of the most controversial tax proposals in the country. The policy has sparked strong reactions not only among cryptocurrency investors but also within the broader financial community. According to Cointelegraph, the new system could lead to a massive outflow of capital from the country, which are concerns currently being discussed at the highest levels of government.

How the new regime will change asset taxation

The Second Chamber discussed this week the details of the reform of the Box 3 tax regime, which is a key element of the Dutch tax system. Careful State Secretary for Taxes Eugène Heijnen answered more than 130 questions from lawmakers, indicating the intensity of the debate around this topic. The new tax system would impose annual charges on paper profits – that is, gains that the investor has not yet realized through the sale of an asset.

According to the proposal, people holding stocks, bonds, and cryptocurrencies would have to pay tax on these unrealized gains every year, regardless of whether they sold the assets. This represents a fundamental change from the current approach, which relies on assumed yields. The court previously invalidated the original system, creating space for a new legislative approach.

Political support surprises, economic concerns do not

Although politicians recognize the shortcomings of the planned tax, most MPs are inclined to support the proposal. Supporters include the Party for Freedom and Democracy (VVD), Christian Democratic Appeal (CDA), JA21, Farmers and Citizens Movement (BBB), and Party for Freedom (PVV). Surprisingly, left-wing parties such as Democrats 66 and the Green-Left Party argue that taxing unrealized gains is more manageable and will prevent budget deficits.

The government points out high financial costs. If the implementation of the tax is delayed, the state treasury would lose approximately €2.3 billion annually – more than $2.7 billion. This estimate highlights why politicians consider early implementation essential, although Heijnen admitted that ideally, only realized returns should be taxed, which he believes could be feasible by 2028.

Investors and analysts in panic over new tax burden

The proposal has sparked a storm of criticism, especially within the crypto community. Among vocal critics is Michaël van de Poppe, a well-known Dutch crypto analyst, who called the plan “crazy.” According to him, a tax on unrealized gains would significantly increase the annual tax burden on assets and force people to leave the country. “It’s no wonder people are leaving the country, and it’s absolutely correct,” he commented.

Criticism is not limited to professional analysts. Informed social media users compare the new tax model to historical precedents – from the Boston Tea Party to the period of terror and the Bolshevik Revolution, suggesting how people perceive this move.

Who will bear the tax and who will be advantaged

The revised Box 3 system is expected to have an interesting impact on various investment segments. Real estate investors would be in a more favorable position – they could deduct costs and pay tax only upon selling the property. However, secondary residences would be subject to a special tax for personal use.

This asymmetry in approach explains why crypto investors and stock traders feel they are significantly affected by the new tax model. While property owners have some natural protection if they hold their assets long-term, cryptocurrency investors face annual taxation of their paper gains.

Threat of capital outflow and the future of taxation

Although many Dutch politicians believe that reform is necessary, the reality may be different. Warning voices point out that aggressive taxation on unrealized gains could prompt wealthy investors and entrepreneurs to move their capital to countries with more favorable tax regimes.

Interestingly, discussions about the “impossibility” of implementing the system by 2028 are now underway, and current pressure on public finances rules out further delays. This suggests that the Dutch government sees this tax as critical to its budget plans, regardless of potential economic consequences.

Whether the new tax will indeed generate the planned three billion euros or provoke a massive outflow of investors and capital will only become clear in practice. For now, opinions on this tax are already completely divided – between those who see it as a necessary measure for a financially healthy state and those who perceive it as a threat to the country’s investment climate.