Netherlands: informant now public and twice a penalty for one violation?

LEGAL RIGHTS OF TAXPAYER: ONE STEP FORWARD AND TWO BACK?

 

Case: informant now public

In the Netherlands the Arnhem Court ruled that if a tax penalty has been imposed, all relevant documents relating to the case have to be given to the tax payer by the tax authorities, including exculpatory information and documents. Taxpayers have a fundamental right timely and complete information.

These include documents relating to:

(-) Whether there is a project and, if so, documents relating to the project;

(-) Documents relating to the examination (reliability) of the informant, the informant and the agreement which the State has concluded with the informant;

(-) Documents relating to the calculation of the additional assessments;

(-) Other documents relating to the affairs of the tax payer, and;

(-) A list of documents relevant to the case, which  are (partially) kept secret for serious reasons, along with the reason why.

Key: informant now public

Under this ruling the tax authorities are required to notify which documents are kept secret and they have to indicate why this is important.

Case: Twice a tax penalty for one violation?

If you do not meet your tax obligations, the tax authority may impose a fine. For late filing or payment you get a default penalty. For concealment of income or fake deductions you get an offense penalty. An offense penalty is between 25% and 100% of the tax payable.

The difference between the two types of fines is primarily organizational: a default penalty is imposed without looking at your file. For an offense, (normally) the tax authorities examined your file.

Based on case law a default penalty qualifies as punishment. Various international conventions require that no one may be tried or punished again for something he has already been tried or punished or acquitted. Because the tax authorities impose default fines automatically without thinking, the international provisions prevent that the tax authorities can impose an offense penalty.

The House asked questions about this, which State Secretary Weekers replied. In 2010 the government has considered several alternatives to impose an offense penalty after an earlier default penalty has been imposed. Because of the fall of the cabinet this has been put aside. State Secretary Weeks is of the opinion that it should be possible to impose an offense penalty after a default penalty. The Tax Plan 2012 will include a proposal for this.

Key: Twice a tax penalty for one violation?

The default penalty is automatically imposed after a late filing. Tax authorities cannot impose an offense penalty if they find out later that income has been concealed or wrong tax deductions were made. State Secretary Weekers wants to “repair” this, which in plain words means you will be punished twice for filing a tax return that violates the rules.

Relevance to practice?

For the Netherlands it's a good thing for the legal protection that the tax authorities have to indicate which information is withheld and must explain why.

At the same time we probably take two steps back, if the tax authorities can punish late and erroneous filing as two separate cases. Obviously, that this is not possible, does not feel fair. However to change the law to make double punishment possible is in my opinion ethically wrong.  People will react in a way that is not desirable. You reap what you sow. In terms of ethics, I did not even mention the proposal to increase the court fees.

The goal can be achieved simply by taking out the core of the problem: stop imposing penalties automatically. Wait for imposing the "too late" penalty until the tax return has been evaluated or it is decided that it does not need to be evaluated. That's more work, but it is fair and just. If the government finds this too expensive, at least accept without complaint the consequence.

Source: Informant now public (Google Translate): LJN: BP8580, Rechtbank Arnhem , AWB 11/322 en 11/324

Source: Twice a penalty for one violation (Google Translate): Kamervragen 2011Z01300