Basket in Tax Law

You are an entrepreneur. Not that you have something to hide, but you can’t help feel uneasy whenever you are subject to a tax audit. On the other hand, you know all too well that ‘being compliant’ and the corresponding verification of such compliance is an inevitable part of doing business. And when Big Brother – what a modern government has become – carries out an audit, it is simply inconvenient. That must be accepted.

But has the limit of the socially and democratically tolerable inconvenience not been exceeded if Big Brother turns out to be multi-headed? For example, when a second audit is initiated during a pending tax audit. For the same tax, that is. Over the same taxable period. Even about interconnected elements. Blatantly from the same FPS Finance, but with and by another territorial service. An audit has already been initiated by the Leuven SME team. And a few weeks later, the Kortrijk SME team kicks off another audit. And to top it all, the same information is requested twice. Fiction or Kafkaesque? Neither. It is now common practice, and even has a name: the ‘Basket Principle’.

This principle applied by the FPS Finance means that tasks are automatically assigned to the ‘most suitable’ official. To put it in context, know that the tax authorities have been consistently reducing their staff over the years. As a result, some services can no longer complete their tasks. The basket system assigns tasks ‘according to resource-based priorities’. This means that the tasks – even sub-tasks – and case files are distributed among the various tax offices in Belgium, even though the taxpayers may live in other regions. The aim is to address staff shortages so that the areas where the shortage is greatest can be managed by other offices.

In this respect, it is important to highlight a number of aspects. The ‘Basket Principle’ management stance is accompanied by some unavoidable shortfalls. Belgium’s Court of Audit – rather up there when it comes to references – clearly states that local terrain knowledge is not only useful, but even essential. In a positive as well as negative sense. The auditing authority’s proximity guarantees insight into the local fabric, as it knows how business is run locally. And where the risks are. The former is positive for the taxpayer. The latter for the tax administration. You don’t have to convince the average accountant of this either. Clients whose activities are far away must be classified as a higher risk under anti-money laundering legislation. If I am an accountant in Hasselt, accepting a garage owner in Menen as my client entails more risk than the same garage owner in Zonhoven. Simply because I understand the local market conditions better and will find out about potential wrongdoings through ‘word of mouth’. Large-scale delocalisation of audits can – read ‘will’ – be detrimental to the quality and to the development of local knowledge, the Court of Audit concludes.

In addition to the incomprehensible situation of dealing with two concurrent audits, the poor taxpayer is often asked to answer the same question stemming from two different services. That is why this should also come under ‘the principle of unique data collection’, also called ‘Only Once Principle’ (OOP). This obliges the government, which of course includes the FPS Finance, to simplify various mandatory government procedures or forms for citizens and companies. The principle aims to spare citizens and companies the trouble of having to provide the same data over and over again. Providing the information once should be sufficient.

Large-scale delocalisation of audits can – read ‘will’ – be detrimental to the quality and to the development of local knowledge

Conclusion: the Basket Principle is anything but customer-friendly. But is that really a criterion for a tax administration? The Dutch Tax Authorities use the term ‘client’ rather than ‘taxpayer’. This is to emphasise that a relationship of trust must be established with the taxpayer. Now that we’re on the subject of trust, there’s another aspect. The closer the government is to the citizen, the more the citizen will trust his or her government. If a taxpayer from rural Kempen has to go to Bruges for a regular tax audit, this does not create a bond of trust. The fact that the return trip takes more than 7 hours obviously does not help either. But of course, this cannot be entirely blamed on the FPS Finance.