"Often of foreign descent" part of Tax Office's fraud "perpetrator profile"

Two new reports from PwC show once again that the Tax Authority made severe mistakes in tackling suspected fraud on many fronts. During a check at "the gate," the department where declarations end up if they may have been completed incorrectly, analysts paid attention to the taxpayer's personal characteristics rather than tax risks. Analysts used a "perpetrator profile," which included the characteristic "often of foreign descent."

"The conclusion of the last two reports are also serious," said State Secretary Marnix van Rij to the Tweede Kamer, the lower house of the Dutch parliament. For one of the reports, PwC investigated registrations in the controversial and illegal fraud detection facility (FSV) as a result of checks at the gate. The other focused on the consequences of registration on this blocklist for entrepreneurs in small and medium-sized enterprises (SMEs).

Thousands of tax returns are manually checked for fraud at "the gate." A large part of the FSV registrations resulted from this extra check. Analysts who worked at the gate were presented with a "perpetrator profile," the exact status of which is not clear. According to that profile, they had to pay particular attention to young men without a partner, "often of foreign descent," and whose actual income appeared to deviate from that in the tax return. Van Rij called this "reprehensible." 

A manual and the offender profile show "part of the selection by the analysts at the gate was more focused on the characteristics of the taxpayer than on the characteristics of the tax risk," PwC wrote about this. Fraud risks are, for example, based on personal characteristics such as nationality and age, and in some cases, on "tax factors associated with personal characteristics," such as donations to mosques.

Partly because of this, there is a risk that "returns with equal tax risks were not treated equally." Van Rij has to conclude that the characteristics that played a role at the gate were "not objectively justified."

The PwC study into SME taxpayers showed that the Tax Authority "inadequately interpreted several general principles of good governance," the rules of the game that the government should adhere to. The registrations on the blocklist are not well documented. The fraud approach also differed considerably per SME office at the Tax Authority, resulting in similar cases not being treated in the same way.