Effects of decision to provide information: Dutch Supreme Court provides clarity
The Dutch Supreme Court rules it may still be argued in proceedings against tax assessments that the effect of reversal and increase of the burden of proof ensuing from an irrevocable decision to provide information is unreasonable.
21 February 2017
Decision to provide information
Any person should provide data and information and make available information carriers for consultation at the Inspector’s request if this may be relevant for the collection of taxes. On top of that, legal entities and natural persons that: a) conduct a business; b) are withholding agents; or c) receive income from other activities, are required to keep records. When the Inspector believes a taxpayer has infringed their obligation to provide information or to keep records, he can establish this in a decision to provide information.
Reversal and increase of the burden of proof
When such a decision becomes irrevocable, the law provides that the burden of proof is reversed and increased for the respective taxpayer. It means an objection or appeal against can be declared well-founded only if the taxpayer can demonstrate convincingly that the tax assessment was excessive. Until recently it was unclear whether this effect always occurs, or whether a plea that the effect of reversal and increase of the burden of proof is unreasonable can still be made in the objection proceedings against the tax assessment to which the decision to provide information relates. The Dutch Supreme Court recently answered this question in the affirmative. The main grounds of this ruling are discussed below.
The Supreme Court argued that the statutory regulation for decisions to provide information aims to swiftly clarify to taxpayers what effect non-compliance with a request for information by the Inspector has on their case. From this, The Supreme Court deduced that in proceedings against decisions to provide information the court does not have to confine itself to the question whether the request for information by the Inspector is legitimate; it may also decide on the question whether the established non-compliance is serious enough to warrant reversal and increase of the burden of proof. According to the Supreme Court, that question may well be addressed – for the first time or once again – in the proceedings against the underlying tax assessment. The Dutch highest court adduces two arguments for this.
Firstly, a decision to provide information, or a legal decision to that effect, should allow the interested party time to still supply the information requested. If the required information is still provided within the term set, the decision to provide information will not be cancelled but the burden of proof should not be reversed and increased following a reasonable interpretation of the law. Hence, the court dealing with the proceedings relating to the underlying tax assessment should decide whether or not the request for information has still been met.
Secondly, the latter proceedings may well be the first ones to fully clarify whether the non compliance established is such as to justify reversal and increase of the burden of proof. To avoid delineation issues, the Supreme Court thus provides that it should be accepted in all cases that interested parties raise that question in the proceedings against the tax assessment to which the decision to provide information relates. However, the legitimacy of the request for information as such can no longer be disputed in these proceedings.
Source: Dutch Supreme Court, February 10, 2017, 16/02729, ECLI:NL:HR:2017:130