Tax office worried about ability to collect a €100 billion in taxes

Problems at the Tax Authority have it worried about its ability to collect about a third of all annual tax revenue, amounting to about 100 billion euros per year. Shortcomings in the agency’s implementation and enforcement of tax legislation put the collection of these taxes at “high risk,” NRC reports based on internal “compliance maps” obtained from the Tax Authority through the Open Government Act.

The compliance maps show “how confident” the Tax Authority is “that tax revenues will structurally enter the treasury.” According to the documents, the “continuity of tax revenues” may be “endangered by the inadequate execution of mass processes.” The agency divided the risks into two categories. “Implementation risks” cover the determination of assessments and collection of taxes. And “enforcement risks” cover supervision of whether citizens and businesses pay their taxes.

The most recently published compliance map, from June 2022, has five types of taxes under “high risk” in both the implementation and the enforcement categories. These are sales tax, corporate income tax, income tax, inheritance tax, and gift tax. Together, they account for almost 100 billion euros in revenue - about a third of the total annual taxes.

Wage tax and motor vehicle tax - 164 billion euros in total - are under high risk in the implementation category. And dividend tax, transfer tax, and vehicle purchase tax - together 10.5 billion euros - are high risk when it comes to enforcement. Only two taxes - insurance tax and energy tax, about 10 billion euros together - are considered low risk in both categories.

A spokesperson for the Tax Authority stressed to NRC that “inventorying risks is emphatically different” from whether the identified risks will “actually occur.”

Outgoing State Secretary Marnix van Rijn (Taxation) said something similar to parliament last week, stressing that the compliance maps are “just one of the tools” used to determine policy. “The compliance map is not an isolated and all-determining instrument that the Tax Authority uses to make choices,” he said.

There have long been concerns about the Tax Authority’s outdated IT systems putting tax revenue in danger. According to NRC, the compliance maps show that the problems go beyond that. For example, the complexity of tax law has only increased in recent years. And existing legislation does not always correspond to the “economic reality.” The service also has to process large numbers of corrections, such as objections or tax refunds, while it is struggling with an increasing staff shortage.