The Tax Division

Total overview of the Tax Division

A number of cases are highlighted below to illustrate the work of the tax division in the interest of the uniformity, protection and development of the law in 2023.

Judgments

Questions may be referred for a preliminary ruling both by and to the Supreme Court. In 2023, the Tax Division answered questions from the Court of First Instance of Aruba on the increase of the Aruban land tax rate from 0.4% to 0.6% halfway through a five-year assessment period (ECLI:NL:HR:2023:488). It ruled that the five-year period serves to provide legal certainty on the value of immovable property, but not to fix the rate for five years. Therefore, an early change in the rate does not violate the principle of legitimate expectations or the principle of legal certainty, nor that of a legitimate expectation that can be considered a possession within the meaning of Article 1 Protocol I ECHR (protection of property). The Aruban legislature was free to change the rate with immediate effect as part of its tax reforms for a more balanced tax distribution. It stayed within its wide margin of discretion in doing so.

In ECLI:NL:HR:2023:1371, the Tax Division itself referred a question to the Court of Justice of the European Union for a preliminary ruling. This question concerned the compatibility with EU law of the statutory liability of company directors for the turnover tax owed by that company. The Supreme Court wanted to know whether the far-reaching consequence of the company failing to notify the tax collector in time of its inability to pay is consistent with the proportionality principle of EU law, given that a failure to notify entails that the non-payment of tax is deemed to be due to mismanagement and the director is not allowed to provide evidence to the contrary if he does not first prove that it was not his fault that the company failed to correctly notify the tax collector of its inability to pay, and given that neither the court nor the tax collector is authorised to mitigate that liability.

In response to Advocate General IJzerman’s claim for cassation in the interest of the law, a mixed panel (members of different divisions of the Supreme Court and a justice extraordinary of the Supreme Court who is a Councillor of the Administrative Jurisdiction Division of the Council of State) ruled that the regulation concerning the penalty to be paid by an administrative body if it does not decide on an application in time (Article 4:17 Dutch General Administrative Law Act) also applies to applications for an ex officio reduction of tax assessments (ECLI:NL:HR:2023:134).

The case ECLI:NL:HR:2023:1568 is important for administrative law as a whole. The Tax Division, which also included a justice extraordinary who is a Councillor of the Administrative Jurisdiction Division of the Council of State for this case, ruled, following the opinion of Advocate General Pauwels, that when the administrative body acknowledges the incorrectness of an assessment it has imposed before the statutory period for objection or appeal against that assessment expires without being used, the fact that the taxpayer did not object to or appeal against that assessment within that period cannot be held against him. After all, such acknowledgement creates the expectation that an objection or appeal is no longer necessary. Conversely, if the interested party fails to object or appeal in time and the administrative body only acknowledges the incorrectness of the assessment after the statutory period for objection or appeal expires, then the assessment will be irrevocable on account of the period expiring without being used.

The case ECLI:NL:HR:2023:1053 concerned the EU-law principle of defence. The tax collector had obtained court approval to impose pre-judgment attachment on a company’s bank balances on account of suspicions of fraud and fear of the disappearance of assets for recourse, on the condition that any additional turnover tax assessments would be imposed within six weeks. The company only received the audit report and the immediately due additional tax assessments from the tax inspector on the last day of those six weeks. This prevented it from defending itself before the assessments were imposed. Because the tax inspector already had the intention to impose additional assessments at the start of the six weeks, the Supreme Court did not see why the company could not be given the opportunity to present its views before the assessments were imposed. As a defence by the company could have led to a different outcome, the Supreme Court reversed the additional tax assessments.

Advisory opinions

The Office of the Procurator General issued advisory opinions in several important tax cases in 2023, which did not lead to a judgment in that same year.

Advocate General Ettema recommended that the Supreme Court, on the basis of the European Convention on Human Rights, grant the exemption for children and the low inheritance tax rate also to the child of a deceased biological father if that child legally became the child of another man through recognition by that other man, even if national law does not allow this (ECLI:NL:PHR:2023:1201).

Advocate General Wattel delivered an advisory opinion to the effect that the Box 3 Legal Redress Act (Wet rechtsherstel box 3), which was supposed to eliminate the incompatibility of the levy of box 3 taxes with the prohibition on discrimination and the fundamental right to property, still violates those fundamental rights. After all, the Box 3 Legal Redress Act does not change the fact that an averaged tax by definition discriminates against all taxpayers with below-average returns and privileges all taxpayers with above-average returns, given that the dispersion around a return on average capital is very large (ECLI:NL:PHR:2023:655).

Advocate General Wattel also delivered advisory opinions in two cases on abuse and improper use of the right to bring proceedings. In ECLI:NL:PHR:2023:1044, he opined that the right to bring proceedings was abused by a citizen who, in collusion with a no-cure-no-pay attorney, initiated substantively hopeless proceedings concerning parking tax assessments elicited by that citizen for the sole purpose of obtaining fixed payments for the costs of proceedings and missed deadlines. He recommended that the Supreme Court order the abuser to pay the costs of the proceedings. The appeal in cassation was withdrawn immediately after the appellant took note of the opinion, so no further ruling by the Supreme Court will follow. The case ECLI:NL:PHR:2023:1042 concerns an interested party seeking EUR 1,500 in non-pecuniary damages because he had to wait a long time for a judgment on his – unfounded – claim for a rounding difference of EUR 0.80. The Advocate General recommended that the Supreme Court, in property tax and motor vehicle tax cases, (i) cap the compensation to be paid for excessive duration of proceedings involving a professional representative at the financial interest in the proceedings that can be argued to exist, in fact and at law, (ii) set the lower limit, below which tension and frustration due to the length of proceedings cannot be presupposed, considerably higher than EUR 15, and (iii) concur with the case law of the District Courts and Courts of Appeal and the Revaluation of the Compensation for Legal Costs in Property and Motor Vehicles Tax Cases Act (Wet herwaardering proceskostenvergoedingen WOZ en BPM), which came into effect on 1 January 2024, resulting in lower compensations and more alignment with the circumstances of the case.

With the exception of the case in which the appeal in cassation was withdrawn, these cases are still pending before the Supreme Court.