It’s not easy to talk about Box 3 without triggering frustration. For years now, this part of the Dutch tax system has been a source of confusion, legal battles, and systemic failure. So when the outgoing cabinet proposed yet another overhaul, this time moving toward taxation on actual return, I gave it the benefit of the doubt. Briefly.

But having studied the proposal in depth, I believe it misses the point. Again.

A Capital Gains Tax Without Gains?

Let me be direct. Taxing people on profits they haven’t realized, on value they do not have in their bank accounts, is not just impractical. It is unfair.

That is the heart of this plan. Under the so-called “Actual Return” model, you would pay tax not only on interest, dividends, and rent, but also on annual increases in asset value. Even if you do not sell those assets. That means you could owe tax on a stock’s growth, a crypto’s surge, or a portfolio’s paper gain, without having earned a single euro from it.

Yes, there are exceptions. Real estate and shares in start-ups will only be taxed when sold. But the main rule remains unchanged. You pay tax on hypothetical returns, not on actual liquidity.

That is not a fair system. It is a liquidity trap.

What’s Changing and Why It Doesn’t Work

In theory, shifting to taxation based on real return sounds more honest than a flat-rate model. But in practice, it introduces a tangled web of complications.

The tax-free capital threshold will become a tax-free result, capped at €1,800 per person.

You will be able to carry losses forward or back, which was not possible under the flat-rate system.

The tax rate will climb to 36 percent.

None of these changes fix the real issue. We are replacing one system that lacked realism with another that lacks stability, feasibility, and legal strength.

Four Problems That Keep Me Up at Night

1. Liquidity Stress on Households

Many people invest for the long term, using portfolios they do not plan to touch for years. Forcing them to sell just to pay tax on unrealized profits undermines the entire purpose of investing. It punishes healthy financial behavior.

2. A System Too Complex to Enforce

The Council of State is right to sound the alarm. This design is extremely difficult to implement. It demands annual valuations of diverse and often illiquid assets. Think foreign shares, private equity, and digital assets. Most taxpayers are not equipped for that. Nor are the Tax Authorities.

3. Legal Uncertainty Returns

We have been here before. The courts have already rejected wealth tax models that violate basic property rights. If the new Box 3 formula forces taxation on fictitious gains, it risks being struck down again. That would mean more court cases, more administrative stress, and another wave of retroactive corrections.

4. International Isolation

We are not following best practice. We are creating an outlier. A recent study by the Dutch Association of Tax Advisers reviewed twelve comparable countries. None of them tax wealth like this within income tax. So why are we pursuing a path that no peer country finds viable?

Is This About Justice or Revenue?

Let us be honest. This plan is not about fairness. It is about predictable budget income. Taxing annual asset growth, even when there is no liquidity, gives the state a steady stream of cash.

But choosing liquidity over legality and budget stability over justice has consequences. This same logic led to the previous Box 3 collapse. We are heading in the same direction again.

Where Do We Go From Here?

The fall of the cabinet may delay implementation. It might also shift the conversation. But the deeper question remains. Why press forward with a design that triggers such serious warnings? From the Council of State. From tax professionals. From ordinary citizens.

As someone who works with these systems up close, with real people and real ledgers, I can say with certainty: this is not just a technical fix. It is a structural misjudgment.

What I Would Rather See

If we want a system that works, we need to keep it legally solid so it does not collapse under litigation.

We need to keep it administratively manageable so people can comply without stress or confusion.

And we need to keep it grounded in real economic behavior, not theoretical assumptions.

Capital gains taxation, where tax is due only when the profit is realized, is used in many stable and respected economies. It is not perfect, but it makes sense. This plan does not.

Final Thought

When governments begin taxing potential rather than outcome, they enter dangerous territory. People do not trust systems that treat them like sources of revenue rather than citizens. And in Box 3, that trust is already hanging by a thread.