The Netherlands is expected to pay billions of pounds in compensation to taxpayers after a divisive levy on investments and second homes was shot down by the Dutch Supreme Court.
On 6 June, the court ruled that the country’s wealth tax went against the European Convention on Human Rights because it forced savers and investors to pay tax on income they had not earned.
The decision has opened the door to legal redress for hundreds of thousands of people who were overcharged by the tax authority.
Outgoing state secretary for finance Marnix van Rij estimated that the upfront cost would be €4bn…
Hang on there Cochise. Paying tax on income they had not earned is illegal? Paying any tax at all on interest, divis, or cap gains is a violation of human rights?
Since 2001, the Netherlands has divided income into three different types, known as boxes. “Box One” taxes employment income, “Box Two” applies to people with a substantial share in a business, and “Box Three” is effectively a wealth tax – levied on income from savings, investments and second properties. For years Box Three has been under attack because it is brd on fictional – rather than actual – returns.
There have been various iterations of the levy but when it was first introduced, the government assumed that everyone earned a 4% return on their assets. Taxpayers were then charged 30% on that yield. This was regardless of whether they held cash, stocks or property and regardless of how their investments performed.
At the time, Minister of Finance Gerrit Zalm presented the arrangement as risk-free. “Any fool can get a return of more than 4%,” he said.
“Earned” or “received”? That could be a tax avoidance technique. If the funds are available to be invested, then they are “earned”, and taxable.
Which is why I like my proposed tax system best. No corporations are taxable (“WOW !!! YES !!!”), but, each year–ALL income flows through the business to the shareholders in the form of CASH–who pay taxes on that income as EARNED income for that year. No exceptions, no excuses. 99.99% of all corporate tax stuff “goes away” forever. Each year, each person gets to decide where (or if) to invest their returns and other funds, thus forcing corporations to have to bid against each other for each investment dollar. Total free market for investors. Suddenly, the “free market” does NOT like the free market. Can’t imagine why…
Ha. Income has to be redeployed in many corporations just to stay even. Where does that factor in? And how does this system stop the pay grab from CEOs, or the useless spending on vanity projects? (I know, I know, because shareholders won’t stand for it. Just like they don’t stand for it now?)
I don’t see it, but maybe there’s more to it than I’m seeing.
After forty years of “supply side” economics, many realize that “Job One” is the glorification of the CEO, regardless of the cost to the company, the shareholders, or any other stakeholder. There is a persistent rumor that Boeing moved it’s HQ from Seattle to Chicago, because the CEO was an opera fan and didn’t like what was available in Seattle. Now, Boeing has moved HQ to DC. Can’t help but wonder what the “JCs” have in mind, beside sucking up to the honchos at DoD, to grab guaranteed profit defense contracts.
In order for this to work, aren’t you making two huge assumptions?
Earnings are the same as cash flows.
If you are distributing the earnings, you leave nothing that might needed for future R&D, Acquistions, ramp up in facilities and employees in anticipation of future demand, and any cushion to weather the inevitable rise and fall.
I think you fail to grasp that businesses are not some independent entity separate and apart from the investors. The investors are the owners of the business. What you are describing is exactly the opposite of a free market principle where investors (owners) decide by choice when and where to allocate excess profits.
As a general rule, if you are enacting a law forcing owners of a business to do something, it’s probably not a free market principle.
Oh this old shibboleth. Taxes are paid when money changes hands. You are taxed on your income. You buy a widgit you pay sales tax. The company that sold the widget has income, they pay tax on that (assuming they’re profitable). They pay their employees, who pay taxes, etc. Property taxes are paid with wages, which have already been taxed. Gas is bought with wages, which has already been taxed. You see?
The system is set up to collect taxes as the money moves. Maybe there’s another way to do it, but you’d have to let us know how.
That’s correct, they can sell their shares and move on to something else. I’m a shareholder in Apple, I don’t want a dividend from them. I want them to either productively use the excess funds in growing the business or strategically buy shares when appropriate, increasing my share of the pie without tax consequences.
Buybacks are divisive. They divide those that understand finance from those that don’t. Sorry can’t remember the source but not mine.
“I think you fail to grasp that businesses are not some independent entity separate and apart from the investor”
I always chuckle when I’m told I’m an owner when I invest my dollars in a business. The CEO’s and other execs are granted options that turn into shares, by the thousands,or 10’s of thousands, or 100’s of thousands. So the average investor barely has more ownership than a person who doesn’t own a share. The higher ups are playing with monopoly ( the game ) money, the average investor is investing limited funds at their disposal.
So, much like I never buy into the State pro sports team being “my” team, or 1 of the 2 pro college teams being “my” team, I never buy into the notion that I am an owner in a company that I invest in. Doesn’t stop me from investing in them, but my infinitesimal portion of the # of shares a company has out there is meaningless in terms of ownership.
Did you ever fall for the “school spirit” nonsense? That “your” school always needed to win, and some other school was your “rival” because someone told you so?
“Please, tell me who I am” (“The Logical Song”, Supertramp)
Your % of ownership does impact your influence. No doubt, owning a few shares isn’t going to give you much traction. It doesn’t change the fact that the shareholders are the owners of the business. If you are choosing to invest in companies giving out without consequences large amounts of stock to managers not aligned with growing shareholder wealth, there are other companies out there.
I’m not following the sports team analogy. I’m not rooting for a business like a fan. I make a decision to invest and if the management is not aligned with my interests or the business has lost its way, I’m out.
The discussion is really about whether a business can or should utilize buybacks. It’s a given that those with a minority interest have less impact.
The analogy is that I basically have the same ownership stake when I buy a ticket to a Detroit Lions game as I do if I own a few 100 shares of Microsoft. You’ve never heard NFL or College fans wax eloquently about “their team” ? I hear it a lot. But I’m not part of the Lions team ( I do luv this version ), and I’m not part of the Microsoft team, despite the emails I get from by broker telling me how important my shareholder vote is, lol. That same stake is basically 0. CEO’s and BODs regularly dilute shareholders. And I do dig into how fast share count is rising before I plunk down my chump change. That doesn’t make me an owner, but it can be a vivid graph of how Management is going to treat the company resources, and help me decide if I want to invest more, maintain status quo, or be ready to dump.
Depends on the corporate managers but MBAs are not a good choice to reward for anything.
Here are some of the problems suggested: Short-term focus: Buybacks encourage a short-term mindset among executives, prioritizing immediate stock price boosts over long-term investments in research and development, as well as sustainable growth.
That’s right it does depend, there are any number of tools that can be misused by executives to momentarily enhance performance for their own short term interest.
Buybacks are one of those tools that can be abused. It’s why it’s important to understand not just the competitive advantage of a business but the quality of the management team running it.
