Tax Authority breaking freelancer law it is meant to enforce

The Tax Authority works with hundreds of potentially fake freelancers while it is the institution in charge of enforcing the law against fake self-employment, the Court of Audit said in a report. The Tax Authority is breaking the law it is responsible for monitoring, RTL Nieuws and Financieele Dagblad report.

People who want to work as freelancers or self-employed in the Netherlands must meet specific requirements. For example, you must have at least three clients per year, and there must be no relationship of authority. If you don’t meet those requirements, you are regarded as a fake freelancer - actually an employee for whom social security contributions must be paid.

The fake freelancer law (DBA) is not only a struggle for the Tax Authority in its role as regulator, the Court of Audit said. “As an employer, the Tax AUthority also has difficulty applying the DBA Act correctly. For example, the Ministry of Finance hires workers through an intermediary, some of whom can, in principle, be qualified as fake freelancers based on the internal assessment framework.”

According to the Tax Authority, it had no choice given its staff shortages. Without external hiring, “the continuity of business operations would be endangered.” The tax office also told FD that several irreplaceable experts insist on working as self-employed because it is “financially unattractive for them to be employed.”

The Tax Authority, therefore, made an exception for 600 freelancers in 2022. In the cases where fake sefl-employment was involved, the Ministry paid workers’ insurance premiums to act “within the spirit of the law” and prevent “social security erosion.”

The Court of Audit is not happy with this conduct. “We understand that the continuity of business operations is of great importance. But the Ministry of Finance, and in particular, the Tax Authority, must, of course, properly comply with the tax laws and regulations for which it monitors compliance. It can have negative consequences for the work of tax inspectors and the credibility of the Tax Authority if the management of the Tax Authority approves hundreds of exceptional situations within its own organization.”