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  • Compliance & Business Integrity
  • 07-02-2017

The State Secretary for Finance, Eric Wiebes, recently notified the Dutch House of Representatives that he intends taking firm action to tackle tax evasion.

In his letter, Mr Wiebes said that international tax constructions played a major part in such evasion. The fact that the Tax and Customs Administration comes across such constructions has been publicly highlighted by reports about the “Panama papers”.

To prevent these tax arrangements being used for tax evasion, or “aggressive tax planning”, Mr Wiebes has announced a number of national and international measures to combat them. We will deal with the most relevant here.

Common Reporting Standards (CRS)
One important method for tackling tax evasion is the (automatic) international exchange of information. This involves the CRS, a system that allows information about the accounts of foreign account holders at financial institutions to be exchanged. Over a hundred countries have now signed up for this. The data exchanged includes bank balances, information about interest, and the gross total of dividends generated by the assets in an account.

Ultimate Beneficial Owner (UBO)
Implementation of the EU’s Fourth Anti-Money Laundering Directive includes the introduction of a UBO register. This includes details of (natural) persons who can be classified as the ultimate beneficial owner (UBO) of an entity. This blog has already dealt with that topic. It’s important to note that the Dutch UBO register does not exist in isolation but that all EU Member States are required to draw up such a register. This will make it easier at international level too to trace who is the ultimate beneficial owner of a business (from whom the relevant tax can be collected).

Abolition of the voluntary disclosure scheme 
Although Mr Wiebes refers in his letter to the 1.9 billion euros in taxes recovered since the introduction of the voluntary disclosure scheme [inkeerregeling] in 2002, he is nevertheless proposing that the scheme be abolished. That means that tax subjects who submit a corrected tax return within two years will be subject to the regular system of penalties, or a negligence fine of up to 120% of the tax due. The Tax and Customs Administration can also transfer a case to the Prosecution Service for criminal prosecution.

Restriction of privilege of non-disclosure and publication of negligence fines
In his letter, Mr Wiebes writes that he finds it undesirable for business dealings or transactions to be kept under the radar of the Tax and Customs Administration through the use of a holder of confidential information who has a privilege of non-disclosure (regarding tax), for example a lawyer or civil-law notary. If it’s up to the Secretary of State, that privilege will soon apply only to confidential communication regarding the legal advice provided and ongoing or future court proceedings. Mr Wiebes also proposes that when an adviser (for example an accountant or civil-law notary) has had a penalty imposed on him/her, it is important for the public to know about it. He considers that the public interest in disclosure of that information outweighs the interest of the fined adviser in confidentiality. All in all, the State Secretary’s measures for combating tax evasion at international and national levels are ambitious ones. This fits in with the increasingly strict approach to tax evasion, both in the Netherlands and elsewhere, in the light of the 2008 financial crisis. It is therefore quite possible that the measures proposed by Mr Wiebes, or at least some of them, will be adopted and will eventually become law. It is therefore important for you to check ahead of time what all these radical measures will mean for you.

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