On July 12, 2006, Lower House members Dezentjé Hamming (VVD) and Crone (successively succeeded by house members Tang and Groot, all PvdA) introduced a private members bill to amend the General Taxes Act (“GTA”). The intention of this bill is to improve the legal protection of taxpayers against measures undertaken by the Dutch Revenue, for example, during tax audits and requests for information. The Lower House accepted the private members bill on September 28, 2010.
The private members bill
The GTA includes a number of far-reaching obligations regarding the provision of information by a taxpayer to the Dutch Revenue, the provision of information regarding a third party by a group of taxpayers (those persons required by law to keep administrative records) and the obligation to keep administrative and accounting records. The private members bill provides a legal procedure for information obligations with regard to the taxpayer's own tax liability or withholding obligation. The information obligations concerning third parties only provide for reimbursement of expenses.
The bill introduces an information decision that can be appealed. A tax inspector, who requests the provision of information, can take this decision. Taxpayers can file an objection against this decision. Failure by the tax inspector to take this information decision, no longer means that the measure of shifting the burden of proof (and making it more onerous) automatically applies when taxpayers fail to fulfill their information obligations, because they are of the opinion that the request for information is unlawful.
Legal procedure for information obligations
The procedure provided for in the bill that has been accepted by the Lower House, can be summarized as follows:
-
the tax inspector requests information and facts or imposes an administrative obligation;
-
the tax inspector can, in case of a failure to fulfill the request or obligation, state this in his information decision, that is open to appeal;
-
the taxpayer can subsequently file an objection against the information decision.
If the tax inspector fails to take an information decision, the burden of proof cannot be shifted at a later stage, because the taxpayer failed to meet his information obligations.
If a judge in a court case against an information decision rules that the request for information was legitimate, the taxpayer is given an extension to meet his/her obligations. The burden of proof is not shifted if the taxpayer provides the information within that extension. The judge does not have to give an extended time-limit where an apparent unreasonable use of procedural tax law has taken place. If the judge rules that the request for information was unlawful, then the taxpayer has no obligation to fulfill the request.
Reimbursement of expenses
In addition to the procedure described above, the taxpayer can, in two instances, ask for a reimbursement of expenses. If a taxpayer fulfils an administrative obligation based on Section 52 GTA, but later decides that the administrative obligation was wrongful, he/she can request a reimbursement of expenses. Secondly, the taxpayer can request reimbursement of expenses if the obligation to provide information regarding a third party has been met, but this obligation is later considered to have been unlawful.
Conclusion
This important private members bill regarding the legal protection of taxpayers has seen considerable delays since its introduction in 2006, because the Ministry of Finance did not agree with an earlier version of it. The present bill is a result of consultation with the Ministry of Finance.
The bill provides for a substantial improvement in the legal position of taxpayers. It primarily removes the threat of the measure of shifting the burden of proof when the obligation to provide information is not met, because the taxpayer does not agree with the tax inspector’s request. The tax inspector is the one who decides whether or not to use an information decision that is open to appeal. If he decides not to use the information decision, then he risks the information not being provided; however, the auditing process will not be delayed. Once the bill has been passed into law, taxpayers with good arguments supporting their refusal to provide the information and facts, can present these arguments to a judge. Even if a judge eventually rules against the taxpayer, this does not automatically mean a reversal of the burden of proof, as is the case at present. The judge will allow the taxpayer a reasonable extended time-limit to fulfill the obligations.
The Upper House now has to pass the bill, after which it has to be agreed to by the government as a private members bill. It is not yet clear when the Upper House will discuss the bill.