Tax Authority too harsh on citizens who forget their tax returns: Inspectorate

The Tax Authority is too harsh on citizens and freelancers who forget to file their tax returns, according to the Taxes, Surcharges, and Customs Inspectorate. The tax office sometimes sends far too high assessments and fines, which can cause Netherlands residents unnecessary trouble, including problematic debts.

If someone fails to submit their income tax or sales tax return, even after multiple reminders, the Tax Authority can make an estimate of their income to determine their assessment. And this can go badly wrong, the Inspectorate said.

It gave an example of a woman who ultimately had to sell her house to cover her tax debts after an incorrect assessment by the Tax Authority. She had started a thrift shop and incorrectly thought she did not have to file a sales tax return initially. Due to illness, she lost track of the reminders the tax office sent. The Tax Authority then estimated her income at 10,000 euros; in reality, it was around 3,000 euros. The assessments and fines piled up, and the woman ended up with 100,000 euros in debt.

“To prevent (payment) problems, we believe it is important that the Tax Authority makes reasonable estimates of income and monitor that reasonableness,” the Inspectorate said. “That requires that the service clearly records how it arrived at the individual estimates.”

The Inspectorate acknowledged that the Tax Authority is launching initiatives to identify people with problems as early as possible. “But these do not always get off the ground. That is due to the lack of decision-making on the question of whether personal data may be used for early detection under the GDPR.”

The Tax Authority needs to devise a solution for this, the Inspectorate said. “We also think it is important that the Tax Authority find a suitable solution for people who have run into significant financial problems in the past due to overestimates.”