The Supreme Court of the Netherlands (Dutch: Hoge Raad der Nederlanden) is about to hand down a controversial verdict regarding the country’s tax law. The bottom line of this ruling is that taxation is theft, at least some tax is theft.
Let me explain. In the Netherlands we have a tax on assets (i.e. on savings and other capital investments). How much you have to pay in asset tax, is calculated as follows: the Dutch Tax Office assumes a fictitious return on investment of 4% and then applies a 30% tax rate, or in other words you have to pay 1.2% of your assets in tax – regardless of the actual return on investment.
This law is quite controversial, and is opposed by both the left and the right. If your actual return on investment is more than 4%, well you’ll be happy as you will pay less than you should if the tax was calculated on actual profit. However, the current interest rate on saving accounts is much lower than 4% (somewhere around 1%).
Since the tax is based on a fictitious income, the highest advisor of the Supreme Court argues that this tax is arbitrary and hence its constitutes an undue infringement on property rights – which are protected by the European Convention on Human Rights. Or put simply this tax is theft.
Though the Court cannot abolish this law, it can decide not to enforce it. This would mean that people who challenge their tax return in court, will not have to pay the tax. However, it’s up to the nationals politicians to fix the law.