An analysis of tax schemes that reduce the government’s tax take
An audit of tax schemes in the Netherlands that reduce the government’s tax take, further to the government’s wish to review the Dutch tax system. We determined which policy goals were being pursued by these tax facilities and instruments, their financial importance, where ministerial responsibilities lay, whether the schemes had been evaluated and how parliament had been informed of them. Parliament can use this information to determine whether policy goals are being achieved through the use of these schemes and weigh the facilities and instruments up against the demands made on the public purse.
We found that parliament is not periodically provided with a
full understanding of Dutch tax schemes that reduce the tax take.
It does not receive information about the intended goals and
effects of a large proportion of the tax facilities, or at what
price they are achieved. It is also not clear which minister is
responsible for many of the tax facilities.
The tax facilities and instruments have a significant financial
importance. It is estimated at at least €97.6 billion. We
identified 179 tax facilities and 34 tax instruments in the tax
legislation we studied. We cannot calculate their precise financial
importance because figures (financial estimates or actual figures)
are not known on a considerable proportion of them.
The State Secretary for Finance is responsible for the
implementation of tax laws and therefore for all tax facilities and
instruments. We found, however, that it was not known who had
actual responsibility for 89 of the facilities. This uncertainty
makes it difficult to render account for the achievement of the
intended policy goals and it is not known how much it costs to
achieve a policy goal. We did not study this point further for the
We found that the Budget Memorandum periodically informed parliament of some of the facilities in accordance with the agreements made with the House of Representatives. We also found that there was no requirement to evaluate 89 of the tax facilities. It is therefore not known whether 89 tax facilities and the 34 tax instruments achieve the underlying policy goals or intended goals regarding purchasing power, income and capital formation or at what price they are achieved.
As part of our audit of the central government accounts 2015 (Netherlands Court of Audit, 2016), we examined a tax scheme implemented by the Ministry of Finance for foreign experts working in the Netherlands, the 30% regulation. We concluded that ‘the effectiveness of the 30% regulation has been inadequately studied’. This conclusion prompted us to determine whether the effectiveness of other schemes had been established and what agreements the government had made regarding budgeting, monitoring, evaluation and the provision of information. We accordingly drew up a list of tax schemes for the purposes of this audit. For parliament to exercise its duty of scrutiny, the cost of such schemes must be known and auditable. Moreover, parliament must know whether schemes that encourage or discourage certain behaviours among taxpayers are effective.
Using public information (tax legislation, tax plans, budgets
and Budget Memorandums) we identified the tax facilities and tax
instruments of relevance to our audit. Our main audit question was,
What tax schemes that reduce the government’s tax take, defined by
us as tax facilities and tax instruments, are there in the
We then answered the following questions for each tax facility:
Tax facilities can take various forms, for example tax
deductions and exemptions.
Insight into the financial importance is necessary to make, for
example, a reasoned choice between the reduced tax take and the
Tax facilities are designed to achieve policy goals, for example
to promote culture or to clean up the environment. They are often
aimed at a specific target group, such as a particular industry,
but there are also generic facilities.
Tax facilities can be seen as policy instruments because they are designed to achieve policy goals. It is therefore important to know who is responsible for the policy.
We determined whether parliament was periodically informed of
In accordance with the Tax Expenditure Assessment Framework, tax
expenditure must be evaluated after introduction. Tax facilities
are not classified as tax expenditure, but they are occasionally
evaluated at the request of the House of Representatives. We
determined which facilities had been evaluated in recent years.
We answered only question b for each of the tax instruments.