Cooperative Compliance and the Dutch Horizontal Monitoring Model

Abstract

Cooperative compliance can be defined as the establishment of a trust-based cooperative relationship between taxpayers and the tax authorities on the basis of voluntary tax compliance leading to the payment of the right amount of tax at the right time. The Dutch Horizontal Monitoring (HM) model can be defined as a means of administrative supervision based on (informed) trust, mutual understanding and transparency between individual taxpayers and the Netherlands Tax and Customs Administration (NTCA). The authors elaborate on the principles of reciprocal trust, understanding and transparency. Subsequently, they assess the trust-based Horizontal Monitoring relationship and its establishment in the light of the principles of reciprocal trust, understanding and transparency. Furthermore, they evaluate these aspects of the Horizontal Monitoring model in the light of the Organisation for Economic Co-operation and Development’s (OECD’s) principles of a cooperative compliance model. First, the ensuing obligations are classified with a view to the reciprocal nature of this set of obligations. Secondly, these obligations are differentiated with respect to their statutory versus voluntary and extra-statutory nature. The research shows that the Horizontal Monitoring model fits into the OECD’s concept of cooperative compliance. A striking difference between the two models is that the OECD model mainly - but not only - addresses the obligations of the tax authorities. The Dutch model, however, creates obligations of a more reciprocal nature between tax authorities and taxpayers. Both models, however, aim to increase trust in the tax authorities and build a service climate in order to promote voluntary compliance. Changing views on tax enforcement, tax compliance and tax planning require continual reflection on further improvement of both the Dutch Horizontal Monitoring model and the general concept of cooperative tax compliance.

Keywords: Cooperative Compliance, Dutch Horizontal Monitoring, (Informed) Trust, Mutual Understanding and Transparency, Extra-Statutory Obligations