Bloomberg Tax, Dutch Unrealized Gains Tax Is a Surprise Reform:

The Netherlands didn’t set out to tax unrealized gains. It arrived there because its highest court invalidated a more modest policy of taxing “assumed” investment returns. Lawmakers were left with a multibillion-euro revenue hole and few legally viable ways to fill it.

Their solution was to tax the annual change in value of stocks, bonds, and crypto at 36% regardless of whether those assets are sold. It’s essentially a limited wealth tax, set to take effect in 2028. … In 2021, the Dutch Supreme Court ruled the policy violated property rights protections under the European Convention on Human Rights. Taxing assumed income detached from reality wasn’t just bad policy; it was unlawful.

Lawmakers … had to either move to a capital gains system or tax annual returns as they accrued. They chose the latter. Notwithstanding initial motivations or how it got there, the Netherlands is about to run a real-world test of mark-to-market taxation at scale.

In the US, debates over wealth taxes and taxing unrealized gains tend to unfold in the abstract. The Netherlands’ tax reform offers both a cautionary tale and a live experiment. It illustrates how quickly court intervention can winnow the menu of policy options. And it will test whether liquidity constraints force asset sales, as detractors contend, or the system hums along and tax revenue surges upward.

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