The baby boomers are leaving money behind. A great deal of money. Over the next ten years, according to UvA economist Paul de Beer, between €230 billion and €240 billion in inheritances will flow through the Netherlands. That is more than the entire national budgets for education, culture and defence combined. And it is only the beginning: by 2035, the annual flow of inheritances could rise to €40 billion. The over-65s now hold €955 billion in wealth — more than double the amount of ten years ago.

The question that is rarely asked: where is all that money going? And, more importantly: where should it go? Because behind the figures lies a political choice that goes beyond the usual division between left (‘tax it’) and right (‘abolish inheritance tax’). There is a third way, and it begins with the observation that both camps are largely getting it wrong.

Where the money flows now

If you follow an average inheritance in the Netherlands from the notarial deed to its final destination, it ends up in four places. Around 46 per cent is tied up in the deceased’s home and, after its sale or transfer, flows back into the housing market — often in the form of mortgage repayment by the heir, or into a second home. A second major flow ends up in savings accounts and investment portfolios, of which roughly 65 per cent of Dutch private investment assets are invested outside the country: in US index funds, global ETFs and Asian shares. A third portion is spent on consumption — travel, cars and renovations. And a small portion is gifted early to children and grandchildren to avoid inheritance tax.

What is striking is that hardly any of this money reaches Dutch companies seeking to grow, scale-ups looking for capital, sustainable-energy projects requiring finance, or innovation in agriculture or technology. The inheritance wave is an enormous flow of capital that almost entirely bypasses the real Dutch economy.

The banking channel — myth and reality

‘But the money remains in the banking system, doesn’t it?’ is the common objection. ‘Banks can use it to finance companies.’ That is true in theory: under Basel III rules, every euro of savings can support three to five euros in business lending. If the €10 billion that flows into bank accounts from inheritances each year were indeed channelled into SME lending, we would be talking about €30–50 billion in potential business finance.

In practice, it works differently. Since 2015, Dutch banks have had structural excess deposits: they receive more money than they lend out. ING and Rabobank also hold 50 to 60 per cent of their assets abroad. The transmission from savings to Dutch business lending is obstructed — not by a lack of money, but by a lack of risk appetite, stringent capital requirements and the simple reality that a bank would rather finance a German energy company than a start-up in Twente. The banking channel exists, but it leaks.

The fiscal spiral no one calculates

Now for the political reflex. The left wants to raise inheritance tax — the GroenLinks-PvdA coalition has already introduced a third band of 30 to 49.5 per cent above €300,000 from 2026. The right wants to abolish inheritance tax, invoking ‘double taxation’ (after all, wealth has already been taxed). Both positions are intellectually lazy, because both overlook the central question: what happens to the money?

Every euro the state takes through inheritance tax disappears from the bank-multiplier mechanism. A euro deposited in a savings account can be passed on as credit three to five times; a euro in inheritance tax goes into the general government pot — of which only a fraction, perhaps one per cent, reaches direct economic strengthening. In its evaluation of previous reductions in corporation tax, the CPB calculated that multiplier effects roughly 50 to 70 per cent of the initial loss of tax revenue. In macroeconomic terms, inheritance tax is one of the least efficient taxes the Netherlands has. It raises €3.4 billion, but costs — in lost banking-multiplier capacity — many times that amount in potential business lending.

Yet blanket abolition is not the answer. Look at Ireland: corporation tax was reduced to 12.5 per cent and revenue rose from €3 billion to €24 billion — a spectacular success on paper. But much of that revenue comes from profit shifting by multinationals, not from real economic activity. The median worker in Dublin sees little of the Irish fiscal miracle. Cutting tax across the board can also mean that you mainly attract letterbox structures.

The third way: conditional exemption

The way out lies not in more or less tax, but in targeted taxation. The Netherlands already has one example that works: the Business Succession Scheme. Those who inherit a family business pay an effective inheritance-tax rate of only 1.1 per cent. The justification is that if family businesses are taxed heavily, heirs have to sell or dismantle them, costing jobs. Politicians therefore already recognise the principle — but selectively.

Extend that principle. Introduce a Qualifying Inherited Capital scheme: heirs who place their inheritance with a bank or asset manager within six months and lock it into productive Dutch assets for ten years receive a phased exemption: 30 per cent in year one, 60 per cent in year four and 100 per cent from year ten onwards. Anyone who withdraws the money earlier pays the tax retrospectively. Anyone who invests the inheritance in a Marbella apartment or an MSCI World ETF pays the full rate as usual.

The sums are instructive. With a participation rate of 40 per cent — comparable to Sweden’s ISK savings account, used by almost half of savers after ten years — the direct loss of tax revenue in the first year would be around €1.3 billion. Substantial, but not apocalyptic: equivalent to a quarter of the childcare benefit. In year four, it breaks even through higher corporation-tax, income-tax and VAT receipts from the stimulated investments. In year ten, the cumulative net effect for the Treasury is positive: around €8 billion. And that is without considering 45,000 to 80,000 additional jobs and a structural increase in GDP of 0.7 to 1.4 per cent.

* cumulative over 10 years: €34 billion in normal revenue + €8 billion in additional revenue from multiplier effects (corporation tax, income tax, VAT).

What is really at stake

Behind these calculations lies a bigger story. The baby boomers built their wealth in an era when the Netherlands was a productive country: steel, electronics, chemicals, shipbuilding and agricultural exports. Their children and grandchildren are inheriting that wealth at a time when the Netherlands mainly consumes, imports and administers. If that enormous flow of capital — €240 billion — follows the same route as the previous wave of wealth creation, through the housing market towards price rises and through savings banks into American shares, the opportunity to reverse that trend will be lost.

The inheritance wave is not merely a technical tax issue. It is this generation’s final major opportunity to decide whether the Netherlands remains a country of production and innovation or definitively slides into becoming a service-based clearing house for other people’s economies. That is not a left- or right-wing question. It is a question about what we want our country to be capable of doing fifty years from now. Do we want to produce or import energy? Develop or buy in technology? Grow or merely transport food?

Fiscal steering is never innocent, but not steering is also a choice — a choice to put our fate in the hands of individual heirs, wealth advisers and algorithmic investment platforms that, by definition, have no stake in the Netherlands. The state may offer something in return. Not through coercion, but through an offer: tie your capital to the Netherlands, and the Netherlands will commit itself to you.

The baby boomers have left this country prosperous. The question is not whether we may touch that wealth. The question is whether we have the courage to steer it deliberately — before it settles, quietly and irreversibly, somewhere else.