Towards a tax on actual returns
Towards a tax on actual returns by Aart Gerritsen and Floris T. Zoutman is forthcoming in Tax by Design for the Netherlands.
The Netherlands currently taxes capital income on the basis of a presumptive rate of return and leaves the actual returns on capital untaxed. This means that the Netherlands effectively levies a wealth tax instead of a capital-income tax. We argue that a tax on actual returns is more equitable and more efficient than the current tax. It would moreover be better for macroeconomic stability.
Thus, the Netherlands would be wise to move from a tax on presumptive returns to a tax on actual returns. Contrary to current policy, we also argue that such a tax should ideally be levied on the returns on all forms of private wealth, including housing and pension wealth. Finally, it should ideally tax capital gains on an accrual basis and tax above-normal returns at a higher rate than normal returns.