The current system of taxing assets in the Netherlands contravenes the right to ownership and European human rights treaties, the Dutch advocate general has said in new advice to the Supreme Court.

At the moment all assets apart from your own home are placed in ‘box 3’ and taxed according to a fictional rate of income that the state believes these assets will be generating.

But this tax rate is based on the assumption that taxpayers invest a fixed part of their assets, and this, the advocate general said, is wrong.

The case dates back to 2017 and concerns a taxpayer with €1m in assets, of which 80% were held in a savings account, generating a low return. He was taxed, not according to the actual return the savings generated, but according to a fictional mix, including just 21% in savings.

This meant his tax bill was far higher than it should have been. The tax on savings in 2017 was 1.63%, on assets 5.39%.

The advocate general said that the current system, based on a mix of assets, does not take the right of taxpayers to decide themselves how to invest their assets into account. The levy, therefore, is not based on the actual income received by the tax payer and has a ‘confiscatory character’, he said.

Currently the tax office presumes that people with €50,000 in assets have invested a third of it, and 79% of it if they have up to €1m. The current tax on savings is 0.03% and on investments 5.69%.

The case is now with the Supreme Court, but no date has yet been set for a ruling.

If the court rules against the current way the asset tax is calculated, it could cost the treasury hundreds of millions of euros, the Financieele Dagblad said. The finance ministry has declined to comment until the court publishes its verdict.