Tax authorities used nationality, physical appearance to assess fraud risk: PwC

Officials at the Dutch tax office analyzed the risk of fraud “with some regularity” between 2014 and 2019 on the basis of "personal characteristics such as nationality or appearance,” concluded auditing firm PwC. The organization was tasked with investigating the Belastingdienst’s use of “black lists.”

It reportedly stripped thousands of residents of the Netherlands of their financial security by blocking them from being able to obtain financial benefits they were entitled to receive. The researchers said they found dozens of examples in their investigation into a controversial fraud monitoring system used by the tax authorities.

"I strongly disapprove of this", said Marnix van Rij, the new State Secretary responsible for Tax and Customs Administration. He called PwC's conclusions difficult to accept. They once again show that the fraud detection facility had "fundamental shortcomings," he said.

In almost all cases, once citizens were put in the controversial system, they were not taken out again. The use of special personal data was also found in about 11 percent of cases where citizens were listed in the Fraud Signaling Service (FSV).

According to PwC, the fraud detection facility did not appear to have played a role in creating conclusions about those who were monitored. However, just by their names being flagged in the system, it was suggested that it is "very plausible" that citizens were not eligible for amicable debt restructuring, whereby they would not have had to repay their entire debt owed. It also prevented them from accessing tax debt cancellation, or the ability to create customized repayment plans.

It was previously known that the system violated privacy legislation, which is why Van Rij's predecessor pulled the plug. Use of the FSV stopped in early 2020 because it did not comply with the General Data Protection Regulation, the Belastingdienst says on its website.

"Due to expansive use within the Belastingdienst, and how it was possibly shared with third parties, special personal data was widely distributed," says PwC.