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Comment by ericbarrett | Hacker News Reader

Stock buybacks are equivalent in purpose to dividends. Many investors prefer them because they are not taxable, unlike dividend income.

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> Stock buybacks are equivalent in purpose to dividends.

Stock buybacks manipulate the stock price. That's not an equivalent purpose. It even used to be illegal.

They are taxable (assuming they turn into stock appreciation which ASML has not been great at for a while) but at a lower capital gains rate.

The buyback event itself is not taxable. For dividends, the recipient must still pay taxes even if they are reinvested (as is common) and this cash flow and tax burden is unwelcome for larger investors.

No. But the whole point of a buyback is that it will presumably cause stock appreciation and that appreciation is taxable, albeit at a lower rate and not until the stock is sold.

In large or complex arrangements the share might never be sold, instead being used as leverage or as part of more complex tax avoidance strategies. Far better than a dividend.

Or just held until death at which point no capital gains taxes are owed

Only if you sell and are not using a structure that will shield you from taxes until an actual withdrawal is made. You can also take out a loan using the stock as collateral to avoid being taxed.

In the US, dividends from stocks held more than a certain amount of time are taxed as capital gains (qualified dividends):

https://www.investopedia.com/terms/q/qualifieddividend.asp

Appreciation on its own is not a taxable event. Only if you sell after said appreciation.

That depends on the tax jurisdiction and circumstances.

In the Netherlands, appreciation is immediately taxable for individuals, but not for corporations.

And what about depreciation?

How does that work in practice?

I presume you don't send a cheque off for €1.36 at the end of the day, (or receive a cheque back after 8 months)

You pay an annual % tax on the value of your investments less debt as of January 1st. This means you still pay taxes if your assets lose value, too. It's a wealth tax that pretends to be a capital gains tax.

Ok. I'd quibble about it being a capital gains tax at all, but anyway.

It doesn't pretend to be a capital gains tax at all. It's a tax on income from assets, which is in practice more or less a 'wealth tax' which is also why it's called the Dutch word for 'wealth tax' in the first place.

It is a tax on an assumed return on assets, determined as a set percentage of wealth. "Vermogensrendementsheffing" means a "tax on return on wealth", not on the wealth itself. In name it is not a wealth tax, but in reality it is, since the assumed return that is taxed has no relation to the true return. This relates to the recent decisions declaring this partially unlawful, see e.g. https://www.tilburguniversity.edu/magazine/supreme-court-net...

You should probably amend this, since this is very misleading to people unfamiliar with the Dutch tax regime. As you are aware, in the Netherlands net wealth (not capital gains / appreciation) is taxable. (Even if you consider the appreciation consequently also taxable, it's certainly not immediate, as the wealth is only assessed once a year).

With the upcoming vermogensaanwasbelasting they'll tax actual gains on stock appreciation.

On the UK we have ISAs that are sheltered from capital gains tax. But not from dividend taxes. The same applies to pensions.

Of course this state of affairs relies on companies not all jumping to stock buybacks, or else the treasury will find some new way of getting their pound of flesh

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