Imagine a scenario where your financial growth belongs to the state before you have even touched it. You acquired Bitcoin at $20,000. It appreciates to $100,000. Suddenly, the administrative gaze turns toward your screen, and the tax authority demands $28,800 in liquid cash. You do not have the cash, so you are forced to liquidate the very asset you intended to hold. This is no longer a theoretical exercise in overreach. It is the new administrative reality.
The Dutch Experiment: Taxation as Throughput
On February 13, 2026, the Dutch House of Representatives approved the "Actual Return in Box 3 Act." Passing with a comfortable majority of 93 votes, the legislation signals a fundamental shift in how modern states view the concept of ownership. Starting January 1, 2028, Dutch residents will be taxed at a flat rate of 36% on the actual returns of their investments. For holders of stocks, bonds, and cryptocurrency, "actual return" includes capital growth, regardless of whether a sale has occurred.
In the framework of Citizen Erased, we recognize this as more than a simple revenue grab. It is an evolution of the administrative identity. Just as the Tudor-era parish registers transformed people into taxable units for the Poor Law workhouses, this legislation transforms digital assets into state-managed throughput. The government is no longer waiting for you to exit the system to collect its share; it is claiming a portion of your potential energy while it is still in motion.
The Double Standard of the Managed State
What is most telling is the architecture of the exemptions. The law explicitly exempts real estate and startup shares from the unrealized gains tax. These assets are only taxed upon realization (sale). This creates a tiered system of citizenship: those who own traditional "bricks and mortar" are granted the luxury of time, while those who seek autonomy through digital innovation are subjected to constant extraction. It is a clear mechanism of digital enclosure, where the walls of the state are built around the most liquid and sovereign assets first.
The Institutional Incentives Behind the Hole
Lawmakers in the Netherlands did not necessarily arrive at this conclusion through ideological purity. They are reacting to an urgent institutional crisis: a "€2.3 billion euro annual revenue hole" left after the Dutch Supreme Court ruled their previous tax system illegal. This is a classic example of how extractive bureaucracy functions. When a system fails, the solution is rarely to reduce the scale of the state; it is to find a more precise, more invasive method of collection to fill the gap.
They have framed this as a "bridge solution." However, in the history of administrative control, temporary measures often become permanent fixtures. Once the machinery for tracking unrealized gains is built, it is rarely dismantled. You can find deeper analysis of these historical parallels in our research on modern tax infrastructure.
Global Contagion: The Zombie Policy
If you do not live in the Netherlands, you might feel a sense of distance. History suggests this is a mistake. Global debt reached record highs in late 2025, hovering near $346 trillion. Governments worldwide are drowning in obligations, and they are looking for any untapped reservoir of value. The concept of taxing unrealized gains is a "zombie policy" that refuses to stay buried. We saw its shadow in the Biden administration’s 2025 budget proposal, which suggested a 25% minimum tax on unrealized gains for high-net-worth individuals. We have seen it floated in California and Illinois.
The Netherlands is simply the first domino to fall. If this model proves successful in raising revenue without immediate economic collapse, other finance ministers will follow the blueprint. They are monitoring the population as a resource, waiting to see how much pressure the system can withstand before the talent begins to flee.
The Liquidity Death Spiral: A Systems Analysis
From a systems-thinking perspective, taxing unrealized gains creates a feedback loop that is inherently destructive to market stability. We call this the "liquidity death spiral."
Consider the mechanics: if millions of investors are required to pay taxes on paper profits every April, they must all sell a portion of their assets simultaneously. This mass selling drives down the price of the asset. Because the price drops, liquidity dries up. The tax itself triggers the very market volatility that critics use to justify further regulation. For an asset as volatile as Bitcoin, the results are mathematically ruinous. You could realistically owe taxes based on a December 31 snapshot of $150,000, only to have the market crash to $60,000 in January. In this scenario, your tax bill could exceed the total value of your remaining portfolio.
The Exit Tax: Modern Serfdom
To prevent the inevitable exodus of capital, the Dutch proposal includes a "protective assessment" (conserverende aanslag). This is effectively an exit tax. If an individual attempts to emigrate to a more favorable jurisdiction, the state calculates the tax on their unrealized gains at the moment of departure. This debt hangs over the individual indefinitely. It is capital control disguised as policy, ensuring that your managed identity remains tethered to the state even if your physical body leaves.
Historical Precedents of Capital Flight
The arc of administrative control is long, but it is also predictable. In the 1970s, the United Kingdom implemented a top tax rate of 98% on investment income. The result was not a windfall for the treasury, but a "brain drain" of historic proportions. High-value individuals, from industrialists to musicians, simply moved to jurisdictions where their growth was not treated as a public utility. Similarly, Sweden’s wealth tax and France’s ISF wealth tax both resulted in massive capital flight, eventually leading to their repeal. You can review the impact of these policies on global capital movement for further context.
Wealth is mobile. In a digital age, it is more mobile than ever before. When the state attempts to tax potential rather than realization, it incentivizes the very behavior it seeks to control: disappearance.
Counter-Strategies: Reclaiming Personal Autonomy
Despite the tightening of the administrative net, agency remains a choice. Sophisticated individuals are already drafting "Plan B" strategies to preserve their self-sovereignty. The movement is visible in the migration toward crypto-friendly jurisdictions.
- The UAE and Dubai: These regions have positioned themselves as the capital of the crypto world by offering zero personal income tax and zero capital gains tax.
- El Salvador: By adopting Bitcoin as legal tender, they have effectively removed the capital gains barrier, treating the asset as money rather than a taxable investment vehicle.
- Privacy Preservation: We are seeing a resurgence in the use of privacy-centric tools. Projects like Monero saw significant interest in early 2026 as investors realized that if the state cannot see the asset, it cannot tax the "potential" gain.
However, the administrative gaze is also sharpening. Regulations like the EU’s MiCA (Markets in Crypto-Assets) and increasing AML/KYC requirements are designed to eliminate anonymity. We are witnessing a bifurcation of the market: a "white market" of compliant, fully visible assets, and a "shadow market" where privacy is the primary utility. By attempting to squeeze every cent out of the population, governments are inadvertently subsidizing the growth of the dark economy.
Conclusion: Autonomy through Intentional Design
The "actual return" tax is a reminder that privacy is not about secrecy; it is about power. When the state has total visibility into your holdings, it has the power to dictate the terms of your growth. It transforms you from a sovereign individual into an asset to be managed.
The lesson of the Netherlands is clear: compliance is increasingly automated, and surveillance expands one small rule at a time. To maintain autonomy in a managed world, you must understand the incentives of the institutions around you. Whether it is through relocation, the use of sovereign tools, or a shift in how you view your digital presence, the time to design your exit or your defense is before the legislation takes effect. Escape is always possible, but only for those who recognize the machinery before the door clicks shut.
