Only a few minor adjustments will be made to the tax interest rate. This was announced by State Secretary Snel of Finance in a letter to the House of Representatives.
REMEMBER
This means that our warnings remain in force. After all, due to the exorbitantly high rate, the interest payable to the tax authorities can quickly mount up to undesirably high amounts. You can prevent this to some extent. How? You can find out in our articles Tax interest: prevention is better than cure …. and Tax interest: apply for a provisional assessment in good time.
Rate unchanged
This is because the tax rates remain unchanged. The current income tax rate is: 4% (on an annual basis). As for corporation tax, the figure is as high as 8% (on an annual basis). These are the minimum rates. If the actual interest rate rises, the tax interest rate will also increase. Although higher interest rates seem likely in the near future, it is unlikely that interest rates will rise above 4% in the short term, let alone above 8%.
The rate, in particular, is a thorn in the side of most taxpayers. Of course, everyone understands that it is entirely reasonable for the government to charge interest on tax payments it receives late. But surely this need not amount to more than compensation for the interest loss suffered by the government. The Dutch government covers its budget deficits by borrowing from the market at rates that are still well below the 1%.
However, Snel points out that the tax interest rate cannot be reduced because he cannot afford to lose that revenue in his budget. We do not consider this a valid argument for maintaining an unjustly high interest rate. Moreover, with a little goodwill, it does not seem impossible to find budgetary provision somewhere within the budget to cover the estimated shortfall of €125 million.
Intervention
The investigation into the reasonableness of the tax interest scheme leads Snel to identify three areas requiring action.
- Taxpayers who currently submit their income tax returns before 1 May (i.e. well within the deadline) may now be liable for tax interest because their tax assessment is dated after 30 June (even if the return submitted is entirely correct). Mr Snel does not consider this reasonable.
- If a tax amount has been with the Tax and Customs Administration for some time during a tax period but has been refunded for one reason or another, the full amount of tax interest must now be paid, even though no interest was paid on the refund.
- Tax interest is still charged on inheritance tax, which must be paid on the basis of a correctly and timely submitted return.
Snel does not address the frequently raised objection that tax interest is also calculated on the payment period specified in the tax assessment. If this were to be amended, it would place too great a strain on the budget.