Scorched-Earth Tax: The War on Private Wealth

The law in question would introduce taxation on unrealized capital gains, meaning that investors would be required to pay taxes on profits they have not yet actually received. Starting in 2028, holdings in stocks, ETFs, and cryptocurrencies would be assessed annually, and any increase in their value would be treated as taxable income — even if the investor hasn’t sold a single share or token.

To understand why this is so destructive, consider the mechanics. Suppose you invest €10,000 in an index fund, and over the course of a year it grows to €13,000. Under a conventional capital gains tax, you would only pay tax when you sell and actually pocket that €3,000. Under the proposed Dutch system, you would owe tax on that €3,000 gain immediately — whether or not you’ve sold anything. If you don’t have that cash on hand, you are effectively forced to liquidate part of your portfolio just to settle your tax bill. This isn’t a tax on success; it’s a tax that punishes the very act of holding long-term investments.

The asymmetry here is particularly cruel. When your investments lose value, your wealth shrinks. When they gain value, the tax authority steps in and takes its cut, compelling sales that further erode your position. In either direction — up or down — the private investor loses ground. This is why critics have begun calling it a “capital destruction tax.” It systematically prevents the compounding growth that makes long-term private retirement savings viable in the first place. Wealth accumulation through patient, long-term investing — the approach recommended by virtually every financial advisor and backed by decades of empirical data — becomes mathematically impossible under such a framework.

What makes this particularly alarming from a European perspective is the precedent it sets. The EU’s legal and tax frameworks are deeply intertwined, with member states often looking to one another for legislative inspiration or political cover. If the Netherlands normalizes the taxation of unrealized gains, it lowers the psychological and political barrier for other governments to follow suit. Today’s Dutch experiment could be tomorrow’s Germany, France, or Austria. The principle of tax harmonization across the EU makes this a genuinely pan-European concern, not merely a Dutch domestic matter.

Large institutional investors — pension funds, hedge funds, asset managers — have the legal and financial resources to restructure their operations and relocate to more favorable jurisdictions such as Switzerland, which sits outside the EU’s regulatory reach. Private individuals saving for retirement have no such escape route. They are geographically and financially anchored, making them easy targets for revenue-hungry governments looking for politically palatable ways to fill budget gaps.

In Germany, approximately 14 million people — roughly one in five citizens — hold stocks, equity funds, or ETFs. At first glance, this represents an enormous potential tax base, and it is precisely this appearance of abundance that makes such policies politically tempting in the short term. But this is where the political time horizon problem becomes critical. Democratic governments tend to optimize for the next election cycle, not the next generation. A policy that generates revenue within a four-year legislative period while quietly gutting the foundations of long-term private wealth creation is, from a narrow electoral standpoint, an attractive proposition — even if its long-term consequences are catastrophic.

The comparison to East Germany is pointed and deliberate. East Germany’s economic and political failures drove an exodus of its most productive citizens westward — people with skills, ambition, and capital sought environments where their efforts could actually bear fruit. Europe risks recreating this dynamic on a larger scale if it continues down the path of punishing investment, savings, and wealth accumulation. High earners and entrepreneurs are increasingly mobile, and policies that make wealth creation structurally impossible will accelerate their departure, leaving behind a shrinking tax base and a weakened economy.

The Netherlands may be a small country, but the legislative precedent being set there carries enormous weight. Voters across Europe would do well to pay close attention — and to hold their representatives accountable before the damage becomes irreversible.