Tackling tax evasion
Examples of tax evasion include when a person deliberately files an incomplete or incorrect tax return. Or when a person or business pays too little tax or none at all, after deliberately providing incorrect information for this purpose.
Aim of efforts to tackle tax evasion
Tax evasion and tax fraud cost the state billions of euros each year. The state is legally entitled to that money. The lost revenue cannot be used to fund services that benefit the whole of society, like education.
Tax evasion also fuels a sense of injustice and undermines tax compliance. Because unless everyone pays their fair share, confidence in the tax system will be damaged. That is why central government has a policy to tackle tax evasion. The policy is aimed at preventing and punishing tax evasion. The Tax Administration, the Fiscal Information and Investigation Service (FIOD) and the Public Prosecution Service implement this policy together.
Forms of tax evasion
Tax evasion occurs in relation to various types of tax, such as:
- Income tax
A person may evade income tax by deliberately filing a tax return that includes incomplete or incorrect information. They might hide details of their income or assets (such as undeclared savings). Or they may dishonestly claim deductions or claim higher deductions than they are entitled to. For example, a person may claim a deduction for a donation that they haven't actually made.
- Corporation tax
A company may evade corporation tax by deliberately filing a tax return that includes incomplete or incorrect information. For example it may dishonestly claim an investment tax credit or other sums to which it is not entitled. Or it may provide an incorrect address.
- Value-added tax
A business may dishonestly fail to charge VAT or fail to remit VAT received to the tax authorities.
- Inheritance tax
A person may evade inheritance tax by not informing the Tax Administration when they receive an inheritance.
Measures to tackle tax evasion
Central government tackles tax evasion in the following ways:
- Reporting offices (meldpunten) have been set up for reporting suspected tax evasion. Anyone can contact the Tax Information Line if they want to make such a report.
- The Fiscal Information and Investigation Service (FIOD) investigates and tackles tax evasion on behalf of the Tax Administration. The FIOD investigates for example bank accounts held abroad by residents of the Netherlands. By doing so it is able to uncover undeclared income and assets abroad.
- Administrative fines and criminal prosecution. The Tax Administration has the power to impose fines. In more serious cases, the Public Prosecution Service can launch a criminal case and ask the court to impose a sentence.
- The Tax Administration exchanges information with the tax authorities of other countries. This makes it easier for the Tax Administration to track down people with undeclared savings.
- Strict rules on voluntary disclosure. People who have undisclosed income in box 2 or 3 can no longer report it to the Tax Administration voluntarily without being liable to a fine. However, if the Tax Administration discovers undisclosed income or assets itself, the fine will often be higher than it would have been in the case of voluntary disclosure. So it is always better to report undisclosed income and assets to the Tax Administration voluntarily. Income in box 1 can still be declared within two years of an incorrect tax return without paying a fine.
- Publication of fines for culpable negligence. The inspector can impose fines on service providers that jointly perpetrate tax evasion. This means tax consultants, civil-law notaries, accountants and lawyers for example. In serious cases the Tax Administration may even publicly announce such a fine. The information will remain on the Tax Administration’s website for five years.