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Netherlands: More Legal Protection for Taxpayers Against Audits

(June 14, 2011) Amendments to the General Law on Taxation (Algemene wet inzake rijksbelastingen), and to other laws relating to taxpayer legal protection in the Netherlands, were published in the country's OFFICIAL GAZETTE (STAATSBLAD) on June 3, 2011. The date of entry into force of the amendments, which were adopted on April 12, will be set by a royal decree. (Larisa Gerzova, Bill on Legal Protection of Taxpayers Adopted, TNS ONLINE (June 6, 2011), International Bureau of Fiscal Documentation online subscription database; Wet van 27 mei 2011, houdende wijziging van de Algemene wet inzakerijksbelastingen en enige andere wetten ten behoeve van de rechtsbescherming metbetrekking tot de administratieplicht en controlehandelingen van de fiscus, STAATSBLAD VAN EN KONINKRYK DER NEDERLANDEN, No. 265 (June 3, 2011) [click on link to obtain official version of the text].)

The amendments accord legal protection to taxpayers in connection with requests for information from the Dutch tax authorities. They also enable taxpayers to appeal against those requests that are issued as “decisions eligible for objection” (voor bezwaar vatbare beschikking, informatiebeschikking). (Gerzova, supra.) The authorities may issue such decisions when taxpayers either do not comply, or insufficiently comply, with the obligation to provide information. Subsequently, however, after a final decision has been made in connection with a decision eligible for objection, any burden of proof regarding the given tax assessment is reversed, to rest with the taxpayer. (Id.)

The amendments reportedly provide less extensive legal protection for taxpayers than originally proposed. (Id.)The amendment bill's sponsors contended that current law not only does not provide for effective legal protection against tax authorities' requests for information, but also does not allow for taxpayer challenges of the authorities' interpretation of taxpayers' obligation to retain documents. The lawmakers held that “the current court procedure is not effective because it does not defer the time to comply with requests for information. Furthermore, in the case of a refusal to cooperate, there is the risk of criminal prosecution, or the burden of proof could be reversed or increased.” (René Offermanns,Audit Measures by Tax Administration – Government Issues Opinion on Bill Concerning Legal Protection for Taxpayer, TNS ONLINE (Apr. 10, 2008).) Thus, the original bill had not only allowed appeals against requests for provision of tax information, but had also granted the possibility of challenging the document retention obligation.

The Dutch government was opposed to the adoption of the amendments. It gave as grounds of opposition the sufficiency of existing rights already available to taxpayers (e.g., the right to go to court after a tax audit to challenge a tax inspector's actions and request compensation for damages), the expectation of increased lawsuits (by 20-25%), an increase in the likelihood of fraud, disadvantages for the tax collection and audit processes, and disadvantages for information exchange with foreign countries. (Id.)