ICT problems at the Tax and Customs Administration make government policy unworkable

Last summer, the top of the cabinet already saw that IT problems at the Tax and Customs Administration make part of the coalition plans unfeasible. Responsible State Secretary Marnix van Rij (Fiscal Affairs, CDA) was therefore advised by Prime Minister Rutte, among others, to call the parliamentary group leaders. It would be “helpful” to “inform them about existing restrictions.”

This is apparent from a memorandum that Van Rij shared with the House of Representatives on Monday, as an appendix to a letter to Parliament in response to revelations of NRC about the problems with the tax authorities. The political room for maneuver to implement fiscal policy for major themes such as the energy transition or the promotion of equal opportunities appears to be severely limited.

In particular, six coalition plans on income tax proved unworkable last summer. There was ‘not enough room’ for, among other things, the introduction of two separate tax brackets in box 2 and the abolition of the fiscal old-age reserve, because the modernization of outdated ICT systems is absorbing all the attention and capacity.

‘No space in the portfolio’

There was also ‘no room in the portfolio’ in the short term for the compensation of people who did not object to the levy on their assets in box 3 – a tax that the Supreme Court deemed unlawful. Introducing a law that should limit loans by entrepreneurs to their own company also proved problematic.

Moreover, the Tax and Customs Administration will not be able to start preparations for compulsory disability insurance for the self-employed until 2026 at the earliest – another plan from the coalition agreement. Due to staff shortages, the introduction of a new yield levy in box 3 must first be completed.

A spokesman for Van Rij could not say on Tuesday whether the desired telephone calls with the party chairmen had taken place, and what the outcome was.

The letter from the State Secretary already showed on Monday that the ICT problems at the Tax and Customs Administration will no longer make any new policy changes possible during this government’s term of office. The problems with outdated ICT systems must first be resolved, the State Secretary wrote, so that “continuity is and remains guaranteed”.

NRC wrote last week that the annual collection of about 170 billion euros will be jeopardized within three years because crucial computer systems will no longer be technically supported after 2026.

Two hundred projects

The cabinet has now drawn up a long-term plan for the first time to tackle the highly outdated ICT. Over the next five years, the Tax and Customs Administration will carry out more than two hundred innovation projects. These include the introduction of a new yield tax in box 3, the ‘phasing out’ of systems running on old programming languages, and the digitization of some declaration processes.

The plan also shows that certain long-running projects have been delayed again. For example, according to the cabinet, the new box 3 levy must be introduced “from 2026”, but the systems required for this may not be ready until the end of that year. The introduction was previously postponed by a year, which, according to internal documents, has cost the treasury at least 385 million euros.

According to the new schedule, renewal of the ICT system for turnover tax will last until the end of 2027. It was previously planned to replace this system before 2026. It has been struggling with “urgent continuity risks” for at least five years, while the Tax and Customs Administration collects 77 billion euros annually. That is 20 percent of the total government revenue. Due to the delay, virtually no changes to VAT legislation will be possible for the next five years, according to the documents.

The Tax and Customs Administration also needs years to complete a number of other ICT projects. The Understandable Letters project, which should contribute to making “citizens or companies less likely to make unintentional mistakes” and therefore call the tax telephone less often, is scheduled to last until the end of 2026. Another project, which should lead to all parts of the service complying to the General Data Protection Regulation (GDPR), must be ready by the end of 2027. The provisions that should make it possible to ban cash payments above 3,000 euros will not be ready until the end of 2024 at the earliest.

Replace employees

It is the intention that “the vast majority of the overdue maintenance” will be resolved by 2026, Van Rij writes to the Chamber. But whether that succeeds depends, according to him, on “many factors”, including the availability of sufficient ICT personnel. According to him, 30 percent of the employees in the ICT department will have to be replaced in the coming years. Van Rij speaks of “a substantial recruitment effort in a structurally tight labor market”.

The House of Representatives will hear more about the ICT problems at the Tax and Customs Administration in a briefing on Tuesday.

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