Ex-Post Evaluation of Tax Legislation in the Netherlands

textabstractIntroduction\nSince the end of the 20th century, ex-post evaluation of tax legislation has consistently\nbeen part of the agenda of the Dutch government. In 2005, the 2001 Income tax Act was\nevaluated. In addition, several tax expenditures are evaluated each year. Tax\nexpenditures can be a controversial aspect of tax legislation. In general, tax\nexpenditures have the drawback that, compared with direct subsidies, there is less\ninformation and less democratic control on these expenditures than on direct subsidies\nwhich are accounted for in the annual budget. In the past 20 years, the Netherlands has\ntaken several measures to improve the accountability of tax expenditures. One of the\nmeasures in the 2001 Budget was the introduction of a framework consisting of several\nquestions which have to be answered before a tax expenditure can be introduced. This\nframework has been amended several times. The current framework consists of the\nfollowing questions: (1) Is the problem clear?; (2) Is the object stated clearly and\nunambiguously?; (3) Can it be proven why financial intervention is necessary?; (4) Can it\nbe proven why a subsidy is preferred over a levy?; (5) Can it be proven why a tax\nincentive is preferred over a direct subsidy?; and (6) Is the evaluation of the provision\nsufficiently safeguarded? An evaluation of a proposed tax expenditure, therefore, has to\nbe guaranteed before the tax expenditure is introduced. Below, the Dutch techniques for\nex-post evaluation are discussed briefly. These include accounting for tax expenditures\nand similar provisions in a tax expenditure report and a tax expenditure overview,\nevaluation reports and, possibly, sunset legislation.