Tax Authorities & Tax Consultants: A Deteriorating Relationship

The deterioration is manifesting itself through a general reduction in accessibility and transparency

The relationship between the Tax and Customs Administration and commercial tax specialists has continued its recent downward trend. What was once a symbiotic and mutually respectful relationship, has been consistently becoming less fruitful in recent years. This deterioration is, from the perspective of taxation professionals, manifesting itself through a general reduction in accessibility and transparency, as well as perhaps a heavier handed approach from the authorities when it comes to erroneous returns.

Research by Taxation Experts

The evidence of this communication breakdown comes from research undertaken by two professional associations of tax service providers; the Dutch Association of Tax Advisers (NOB) and the Tax Advisers Register (RB). They recently published the results of the research focused solely on the relationship between their members and the tax authorities in what has been the third investigation of this kind. The motivation to perform such research is in itself indicative of how seriously tax professionals are taking this issue.

A slight majority of tax service providers who responded (51%) suggested that their relationship with the authorities has remained consistent over recent years, with over a quarter suggesting things have worsened either ‘somewhat’ or ‘strongly’. This negative response made up a considerably larger share than it did than in 2016 when the most recent survey was undertaken. RB Chairman Fons Overwater described the findings as showing that there have been many aspects of the relationship that are continuing to deteriorate, with very few positives to report. So what is behind such a uniform downward spiral in what is such a necessary relationship?

What Changed for Dutch Tax Consultants?

Things are becoming increasingly difficult when the authorities are slow to respond with clarity on inquiries made by professionals

There are indications that the social discussion around tax issues has contributed to a more adversarial relationship between consultants and the authorities. With the majority of tax advisers seeking to simply ensure their clients meet the letter of the law, things are becoming increasingly difficult when the authorities are slow to respond with clarity on inquiries made by professionals. Indeed the pressure is becoming intensified with authorities becoming more heavy handed by being increasingly quick to hand out fines and other sanctions. Many of the survey’s respondents suggest that these sanctions are often imposed erroneously and indeed that it is becoming difficult to reach compromises with authorities in the interests of their clients. The feeling among many consultants is that some hardliners in government are inclined towards assuming wrongdoing due to public discourse about tax avoidance, when in reality there are huge amounts of issues with tax submissions that are innocent mistakes. Ironically, these mistakes are more likely to be made with an uncooperative tax authority.

Tax Professionals Need Access

This brings us to the issue of accessibility. With the report finding a steady decrease in accessibility and transparency from the authorities, consultants are finding their job increasingly difficult. There are suggestions however, that this is not down to any unwillingness on the part of the authorities, but the result of budget cutbacks. Diminished resources can only be stretched so far and it is certainly possible that those in administrative positions find themselves stretched in their duties and unable to be as available to consultants as they might like. Nino from Executive Mobility Group further suggests that the recent cutbacks have resulted in a brain drain within the department causing the loss of many of the more qualified employees. EMG themselves have found little reduction in the quality of their communications with the authorities due to long-held relationships there. Not all consultants unfortunately, can benefit from such connections. It is worth noting however, that Nino remarked upon an increasingly more rigorous process when it comes to qualifying clients for the 30% ruling.

The Ball is in the Court of the Tax Authorities

There is a clear lack of appreciation for the vital service provided in the Netherlands by tax consultants

According to Overwater and Zoetmulder, the respective chairmen of the RB and the NOB, it is simply shortsighted of the government to have cutbacks in the taxation department. Particularly cutbacks that impact the ability of advisors to do their jobs. Their view is that it is precisely these advisors who help guide their client’s money into the state coffers and without them, it is likely that the process of taxation in the Netherlands would be markedly less streamlined. Put simply, there is a clear lack of appreciation for the vital service provided in the Netherlands by tax consultants and if communication issues are not addressed, it is likely that the government will be shooting themselves in the foot.

Overwater and Zoetmulder have recently provided the survey, in which there were 3000 specialist respondents, to the Chief of the Tax Authorities, director general Jaap Uijlenbroek. It remains to be seen what action, if any, is to be taken as a result.

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