Reforming the fiscal service a taxing affair

Edition 20 June 2017, by Johannes Visser

It’s not easy being a tax-man in the Netherlands service a taxing affair these days. It’s one thing to always finish last in popularity contests with the public at large, but co-workers now leaving the bureau en masse are making his life more difficult as well, not to mention the ICT-systems used by his employer that continue to be outdated and slow.

Last month the National Audit Office (‘Algemene Rekenkamer’) of The Netherlands published a highly critical report of the state of affairs at the ‘Belastingdienst’. According to the auditors, the tax office was barely able to perform its duties in 2016 and will be unprepared to process the much-needed reform of the taxation system that a new government will want to implement. Politicians of all stripes and colors have been calling for years to simplify the Dutch taxation system, but if up to the national auditors, any new ambitions will have to be put on hold before the structural problems at the Belastingdienst have been solved.

One of the main problems is that the fiscal service is going through an overly expensive and poorly thought out phase of reorganization. As tax declarations are moving from paper to on-line, the bureau’s need for qualified personnel has changed accordingly. Between 2016 and 2023 the tax office will need to shed five thousand of its thirty thousand employees. Workers have been offered generous severance packages and already four thousand employees have opted to leave the service, mostly well-qualified tax personnel with decades of experience that can hardly be done without. The reorganization has already gone over budget with as much as 66 million euros. Under-secretary of the Exchequer Eric Wiebes calls for government intervention, fearing that the Belastingdienst will be unable to collect taxes on time in the years to come. Talks with the labor unions about making the pay-to-leave schemes less generous are ongoing, but it is estimated that almost a quarter of all tax employees will have left by the end of 2022.

The national auditors have also concluded that the checks and balances within the Ministry of Finance, to which the tax office answers, have not functioned well. ‘Little distinction is made at the top between policy, implementation and supervision. The highly informal working culture within the Belastingdienst, and an apparent laissez-faire attitude of the Exchequer towards the tax office created a space in which the existing problems have been allowed to fester and even escalate’, according to the auditors’ report. As a result, the continuation of daily collecting about a billion euro by the tax office becomes a liability because a number of vital processes within the bureau is in danger, the auditors warn.

Systems unprotected

One of the pre-existing problems for which the Belastingdienst got roasted by the national auditors last year, is the disturbingly feeble state of its ICT-systems, especially its digital security systems. The tax office has started an internal investigation into possible security breaches. In February this year, the investigative television program ‘Zembla’ reported that the tax office’s security system between 2013 and 2016 was not working properly, with all tax data of eleven million citizens and two million companies unprotected against access by unauthorized persons. Based on more than a hundred confidential documents and emails of an internal investigation that tax employees had leaked, it came to light that there was insufficient physical access security. In addition, monitoring and logging were substandard, since no records were made of employees downloading or sharing data with others.

Under-secretary Wiebes says there are no direct threats to the Belastingdienst, nor are there ‘any indications of risk’, but nervous Dutch parliamentarians have called for measures to improve security. Since there have been repeated warnings to improve security previously, Wiebes admitted during parliamentary session that these leaks were ‘embarrassing’. He has called upon the stressed-out tax officers to report any systems weaknesses to management instead of the media. However, one of the issues that was unearthed in the Zembla broadcast is that there is a deep chasm between the people in charge of the fiscal service who tolerate little criticism, and their underlings.

Director-general Hans Leijtens, the highest non-political authority in charge of the Belastingdienst laid down his duties and has been replaced. His former political boss Wiebes has vied to hire 140 new experts to run the personnel transition more smoothly. Jeroen Dijsselbloem, the Dutch Chancellor of the Exchequer, confirmed this renewed focus on the Belastingdienst and promised more money to keep the fiscal service up and running. He says he has also taken measures to increase financial oversight over the tax office and admits there is still much work to be done; but he also credits his department for ‘already solving serious flaws’, including creating a single systems information database and integral plans for systems modernization.

In response to the National Auditor’s report in Dutch Parliament, Dijsselbloem has said that although he shares the auditors’ worries on the long term continuity of the Belastingdienst, day to day processes are not in danger. Finding a proper balance between modernizing the tax office, phasing out employees while hiring new ones, while also steadily filling up the Dutch treasury, is now one of his main priorities domestically, all the while balancing with his duties as president of the Eurogroup and dealing with Europe’s budget crises. Despite the criticism of the National Audit’s report, Dijsselbloem has also urged to keep some perspective and look at the bright side of things.

Indeed, not all is bad news according to the national auditors. Ninety-eight point seven percent of all ministerial expenses have been rated as ‘legitimate’, which means The Netherlands is doing quite well ‘historically and internationally’ in its drive against corruption. Financially speaking, the Dutch government is also overperforming in comparison to the other European states. Government debt shrank in 2015 to 65,1 percent, for the first time since 2006. The budget deficit is now lower since any time after the 2009 credit crisis. With this mind, the national auditors have put their stamp of approval on last year’s budget.