Tax service suddenly halts thousands of provisional tax refunds; MPs want explanation

The Tax Authority suspended the provisional tax refund of 124,000 people in January, a significant increase compared to the between 79 thousand and 82 thousand halted in 2017, 2018 and 2019. Thousands of these suspensions were unjustified and many of the affected persons were only notified about the suspension in mid-January, when they should already have received their money, RTL Nieuws reports.

Coalition party CDA, opposition party SP, and a number of elderly organizations are concerned by the sudden increase and demand an explanation. According to RTL Nieuws, the sudden increase in suspensions coincides with a new selection rule implemented by the Tax Authority. 

People in the Netherlands can request a provisional refund if they assume they will be entitled to a refund when filing their tax return. For example, someone who gets 3 thousand euros back annually due to mortgage interest deduction can choose to have a twelfth of that amount paid to them monthly — 250 euros per month. Normally, such a provisional refund is automatically continued in the new year. But as the rules and people’s circumstances can change year by year, and the Tax Authority wants to avoid paying provisional refunds that people will end up having to pay back, the Authority suspends provisional refunds every year based on so-called selection rules. 

But now a selection rule caused a massive spike in the number of suspended provisional refunds. According to RTL, the rule prescribes that a provisional refund will be stopped in 2020 if there was a combination of income from work and benefits, such as pension, unemployment benefits, or transition allowance in 2018. The Tax Authority assumed that in such a case, it would be difficult to estimate the current income and therefore the refunds a person would be entitled to come tax return season. 

But according to RTL, this can also lead to a provisional refund being halted in 2020, while the recipient was rightfully entitled to it throughout 2019, based on outdate data from their 2018 tax return.

The broadcaster spoke to one person affected in his way. He told RTL Z that in January he was suddenly out 600 euros, and was only informed why by mid-January — when he should have already received his refund. It soon turned out that nothing had changed for him, and he was still entitled to his refund. But it led to administrative hassle and days of stress.

As citizen, you can apply for a new provisional refund, but then you miss out on the January refund. The money still belongs to you, and will be paid spread out over the rest of the year. But a few hundred euros can leave quite a gap in a household budget.

CDA parliamentarian Pieter Omtzigt is flabbergasted. «That the Tax Authority is doing its best not to give too much refund that they’ll have to reclaim afterwards is fine, but if you do it you have to tell people in time how much they can expect to receive this year,» he said to the broadcaster. «And especially for people who retire, that’s pretty predictable.» If people are warned in time that their provisional refund will be suspended, they can take timely action to prevent this from happening if it is a mistake. 

Interest groups for senior citizens are also critical. According to them, it is precisely people who retire that are affected by this selection rule. ANBO understands that the Tax Authority wants to prevent too large refund payments, but is angry about the way in which this happen. «It would be better to warn people to adjust the provisional refund in time. The message about the provisional refund should be sent in November, so that there is time enough to take action. Unilateral cancellation can lead to months of no refund received,» the association said. 

The Tax Authority told RTL Nieuws that people received their notification late, because the Tax Authority was waiting for parliament to approve the Tax Plan at the end of November. The selection rules the Tax Authority uses form part of the Tax Plan. When parliament approved the Tax Plan, the process of halting provisional refunds started. Letters were sent out from December 27th. It was bad luck that some only arrived in mid-January, a tax spokesperson said to the broadcaster. 

SP parliamentarian Renske Leijten called that no excuse. «If you know that you have a new rule and that it’s going to affect tens of thousands of people, the you also have to take precautions to rectify incorrectly canceled returns very quickly,» she said to the broadcaster. Moreover, the Tax Authority should prevent situations like this by having an employee assess whether the system correctly or incorrectly halted a refund, she added.