Dutch ‘Millionaire Tax’ deal threatens government coalition collapse

THE HAGUE--A proposed millionaire tax in the Netherlands has pushed Prime Minister Rob Jetten’s minority government toward a possible collapse after two coalition parties reached an agreement with left-wing opposition parties without the support of their governing partner, the VVD.

The agreement, which would raise approximately €1 billion in additional taxes on wealth and investment income while reducing taxes on working people, has placed the VVD in a position where withdrawing its support could bring down the government and potentially trigger another general election.

The political confrontation emerged Wednesday, November 11, after governing parties D66 and CDA reached an agreement with opposition parties Pro and Volt on amendments to the government's 2027 tax plan. The agreement was negotiated without the participation of the VVD, the third member of the governing coalition, which has opposed additional taxation of wealthy individuals and business owners.

The agreement represents a compromise on an earlier proposal by Pro and Volt to raise €1.5 billion through higher taxes on wealth, savings and investments. D66 and CDA had rejected that original proposal as too far-reaching, but subsequently accepted a revised package that would raise approximately €1 billion.

At the center of the agreement is what its supporters are calling a millionaire tax, introducing a new top tax rate of 38.5 percent on annual income from savings and investments exceeding €60,000. The existing basic rate would be reduced by half a percentage point to 35.5 percent.

The higher rate is expected to generate approximately €221 million in additional revenue. Other measures include changes to inheritance and gift taxation, restrictions on arrangements used to transfer wealth between generations and efforts to reduce tax avoidance.

The package also includes measures targeting certain tax arrangements used by wealthy individuals, including a proposed exit tax for millionaires leaving the Netherlands.

According to Dutch media reports, approximately €900 million of the additional revenue would be used to reduce income taxes on working people, primarily through a reduction in the lowest income tax bracket.

Pro leader Jesse Klaver described the agreement as a breakthrough in negotiations that had threatened to derail the government's tax plans.

"This is a breakthrough," Klaver said. "In the last few days we have held talks to bring about a compromise to make the Netherlands fairer. If this plan is accepted, the Netherlands will have a millionaires’ tax."

However, the agreement has created an immediate political problem for Prime Minister Jetten because the VVD was excluded from the negotiations and has previously made clear its opposition to the proposed taxation measures.

VVD parliamentarian Wendy van Eijk had described the original millionaire tax proposal as unacceptable, saying it crossed the party's "pain threshold" and was "bad for the Netherlands."

The VVD has argued that higher taxes on wealthy investors and business owners could discourage investment, weaken the country's competitiveness and encourage businesses and capital to relocate abroad.

The revised agreement now forces the party to decide whether it can remain in a government whose other coalition partners have negotiated a major tax policy change with opposition parties.

Should the VVD withdraw its support from the coalition, the Jetten government could collapse, leaving the Netherlands facing another period of political uncertainty.

The immediate question is whether the VVD will oppose the amended tax plan in Parliament while remaining part of the governing coalition, or determine that the agreement represents a sufficient breach of coalition cooperation to justify withdrawing from government.

The minority coalition of D66, CDA and VVD already depends on support from opposition parties to secure parliamentary majorities. The government requires additional votes in both the House of Representatives and the Senate to approve its legislation.

The agreement with Pro and Volt could provide sufficient support in the House of Representatives for the amended tax plan, even if the VVD votes against it. However, parliamentary approval of the tax measures would not automatically resolve the disagreement within the coalition.

The political developments have already prompted Prime Minister Jetten to cancel a planned visit to Dublin for a meeting of European Union leaders. Instead, he is expected to attend an additional parliamentary debate on the budget scheduled for Thursday morning.

The government is also facing a deadline for finalizing its tax plans for 2027. Dutch tax authorities have warned that failure to approve the necessary legislation before November 20 could prevent the implementation of new tax rates at the beginning of the year.

Such a delay could result in millions of taxpayers initially receiving assessments based on outdated rates, requiring subsequent corrections. Employers could also be forced to calculate salaries using 2026 tax rates during the first quarter of 2027.

Meanwhile, Dutch lawmakers have taken steps to limit the possibility of another early general election.

On Tuesday, Parliament supported a motion requiring political parties to explore alternative coalition arrangements before proceeding toward elections following a government resignation.

The measure is intended to provide an opportunity for a different governing majority to emerge if the current coalition collapses.

If new elections become necessary, March 2027 has been identified as the earliest likely period for a vote. Such an election would be the third Dutch general election in less than three and a half years.

In the meantime, a caretaker government would be responsible for managing ongoing affairs and seeking sufficient parliamentary support for essential budget legislation.

For the Netherlands, the immediate consequences extend beyond the proposed taxation of wealthy individuals. The disagreement now concerns the ability of the three coalition parties to continue governing together despite differences over economic policy and parliamentary cooperation.

The VVD's response to the agreement, together with Thursday's parliamentary debate, will be central to determining whether the tax compromise can proceed without bringing down Prime Minister Jetten's government.

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