Governments would like us taxpayers to believe that there is only one battle, and that would be the fight against tax fraud. There is at least one other battle, but the authorities would rather not tell us about it. It is an internal struggle that they prefer to keep under wraps. This fight is about getting the biggest possible slice of the international tax cake. Taxpayers must pay tax(es), that’s a given worldwide. Where those taxes should be paid, and which country is allowed to feed its treasury with the tax revenue is far less obvious. This explains why Europe has not reached an agreement on digital tax in recent weeks.

The digital tax is a taxation regime that has yet to be introduced. In a way, the tug-of-war and the internal bickering are understandable since the rules of the game haven’t been set yet. But what if the rules are already in place and a country deliberately ignores them to suit its own interests? A taxpayer who flouts mandatory rules is called a fraudster. And what if a state does that? That shouldn’t happen. And yet, it does.

“A taxpayer who flouts mandatory rules is called a fraudster. And what if a state does that?”

Just as Belgium did before, in 2017 the Netherlands also put an end to the possibility of accruing a company pension. While in Belgium, this is called an ‘internal pension promise’, it goes by the name of a ‘self-administered pension’ in the Netherlands. After the system was discontinued, a Dutch company manager could opt to buy off the accrued pension entitlements. Let’s assume he lives in Belgium. The double taxation treaty between Belgium and the Netherlands grants the Netherlands the right to tax a commutation if the commutation lump sum exceeds 25,000 euros. The Belgian tax administration would not be true to itself if it weren’t really questioning everything it can question, which it did in a 2017 circular letter. This met with an objection from the competent Dutch State Secretary. Ultimately, the Belgian tax administration lost the argument, after a long legal battle which was settled by our Supreme Court. The judgment leaves no doubt. “This treaty provision does not grant Belgium the right to tax income that was not effectively taxed in the Netherlands,” it read. And, yet, the administration is continuing to misbehave. In a circular letter dated 18 October 2019, it once again defied the Supreme Court ruling. If, in the case of the 2017 circular, the accusation that the administration deliberately ignored the reality was already justified, this applies a fortiori to the 2019 circular. Earlier in this column, you read what we call a taxpayer who acts like that.

And unfortunately, this behaviour does not end with that circular. The administration also keeps taxing the pensions accrued in the Netherlands, almost with impunity. Taxpayers have to go to court to be proven right. The tax administration’s motto seems to be: every taxpayer who fails to do this is a win.

In the school yard, that would be called “racketeering the Dutch”. But, like on the playground, it is better to be careful with the racketeering. This can provoke unexpected reactions. The Dutch have a culture that is far more critical of the government’s actions. In the case of the childcare benefit scheme, the Dutch tax administration is under investigation on accusations of extortion, for deliberately levying wrongful tax.