Entrepreneurs about the tax authorities: more customization in case of different situations

Home” Entrepreneurs about the tax authorities: more customization in case of different situations

In the second half of 2023, Ipsos I&O investigated, on behalf of the Tax, Surcharges and Customs Inspectorate (https://www.inspectiebtd.nl/), the experiences of freelancers and SMEs in their interaction with the tax authorities. Where the service scores more than enough for the standard processes, the problem lies for some of the entrepreneurs when their situation deviates from the common denominator. This is where they get into trouble in the standard process. You can then make mistakes that the tax authorities respond to strictly and formally. In this article, we provide the findings from the study conducted by Ipsos I&O.

August 26, 2024 | Ronnie Maathuis & Melle Conradie

Taxes: an annoying but also important side issue

On average, freelancers and SMEs give the tax authorities a 6.5 rating. In other studies into government services, the average is also often between 6.5 and 7.0.^[1] The entrepreneurs who give a higher grade call the tax authorities tidy, fast and expert. Failure to comply is said to experience rigid decisions, unclear communication and limited accessibility from the tax authorities.“Tax matters secretly have a big impact on your business. I notice that almost all my business decisions are ultimately tax-driven, right down to arranging a staff outing or a gift.” (SME)Entrepreneurs usually don't like to deal with side issues such as administration and taxes. These types of activities keep them away from core activities and, according to them, are at the expense of their entrepreneurial freedom. However, they recognize the usefulness and necessity of taxes and generally understand the complexity of the tax authorities's task. In their view, the service has received many more tasks and at the same time has had to sacrifice (staff) capacity.

Strict reactions to mistakes create feelings of injustice

For entrepreneurs, paying taxes is part of doing business. But they prefer to spend as little time and money as possible on it. As a rule, the tax process is error-free and effortless. The use of professional software and bookkeepers contributes greatly to this. This extra support is not obvious for smaller, less wealthy entrepreneurs — including many freelancers — because of the costs involved. As a result — and because the basic provisions for some of the tax authorities's entrepreneurs offer little support in the sometimes complex calculation that entrepreneurs have to make — bottlenecks arise. A mistake is easily made, especially if you, as an entrepreneur, fill out the returns without help.“Making business returns is far too complex and should be simpler and more customer-friendly. It's crazy that I have to hire an accountant to make sure everything is going well.” (self-employed person)More than a third (36%) of entrepreneurs (self-employed and SMEs) think the tax authorities are overly strict about minor errors. Three out of five (59%) entrepreneurs believe that the tax comes up too quickly with (the prospect of) fines and penalty interest. The communication that people receive about this is often experienced as (too) harsh and compelling (“you have to pay”). Some entrepreneurs refer here to the hard line that the tax authorities used in their perception at the time of the benefits affair. Decisions and decisions can sometimes feel unfair to entrepreneurs because of what they think is a strict and compelling response to minor errors on the part of the tax authorities. Three quarters (78%) of entrepreneurs who experience unjust decisions say they are (a lot) affected by this. This is almost half (44%) of all freelancers and SMEs.“If you are only 1 day late in crediting the account of the tax authorities, you will be fined immediately. While the tax authorities themselves can sometimes take a long time, apparently, to refund money if you have paid too much tax.” (self-employed person) “This also has to do with the benefits affair, that the tax authorities come up with fines if people don't do something quite right and that they can make a mess of it themselves without consequences for them.” (self-employed person)

Entrepreneurs do not always experience the equal treatment they expect

Entrepreneurs find clear communication important. But clarity sometimes results in a compelling tone in decisions or decisions. This tone is not in line with the idea of equality that entrepreneurs strive for in their business contacts. A large majority (92%) of entrepreneurs expect the tax authorities to address and treat them in an equal way. According to the entrepreneurs, this includes including contact details on a decision or decision. Entrepreneurs find it frustrating that they cannot directly contact the person at the tax authorities who is about their case. For example, four out of five entrepreneurs (80%) would find it an improvement if they could also contact the tax authorities by email. It also frustrates them when the tax authorities fail to meet a callback appointment. This evokes a sense of inequality among some entrepreneurs. Especially when it appears that other entrepreneurs do receive more service from the tax authorities because they do have direct, shorter lines of communication with tax service employees.“For standard messages, I understand the lack of contact information, but once communication exceeds that level, there must be a reference.” (SME) “Putting down cheap people with a call script doesn't work. As an entrepreneur, you can't keep busy with that. You can't mail, all you have is that number. That is unfair, because they ask if you contact us.” (SME)Some entrepreneurs tell us that they sometimes call multiple times asking the same question because, in their experience, answers may vary from operator to operator.

Entrepreneurs identify some areas for improvement

It seems difficult for most entrepreneurs to fully improve their interaction with the tax authorities overnight. But they think that adapting standard communication in response to (input) errors by entrepreneurs should be possible in the short term. For example, according to the entrepreneurs, the payment process should be less black and white: if an amount is not received on time, that does not mean that the entrepreneur has completely failed. The tax authorities could first ask if something went wrong and give the entrepreneur the opportunity to correct his mistake. It is also suggested that the tax authorities take more account of the payment history, with loyal payers more likely to get the benefit of the doubt. Finally, according to the entrepreneurs, being able to enter into a payment arrangement should be made easier.

Background and design of the research

Ipsos I&O (then still I&O Research) carried out this research on behalf of the Tax, Surcharges and Customs Inspectorate. Insights and signals from society are the starting point for the inspectorate's work. With the right information, the inspectorate knows where its efforts are most desired and how to prioritize its activities. In this context, the inspectorate asked Ipsos I&O to investigate the extent to which freelancers and SMEs experience functional and emotional bottlenecks in their interaction with the Tax Administration. This study took place between June and November 2023. In a first round of 5 group discussions with a total of 16 entrepreneurs, the attitudes and experiences of entrepreneurs were identified. What emerged during those discussions was then presented to a representative group of 1,080 freelancers and SMEs with an online questionnaire. In this way, we were able to draw more general conclusions about the experiences of entrepreneurs with the tax authorities. Finally, a second qualitative round explored the results of the questionnaire during 5 group discussions and 4 interviews with a total of 23 entrepreneurs.

Want to read more?

Read here on the site of the Inspectorate of Taxes, Surcharges and Customs, a real-life story of one of the entrepreneurs who participated in the investigation.[1] For example, see https://www.rijksoverheid.nl/binaries/rijksoverheid/documenten/rapporten/2022/10/31/hoe-kijken-stakeholders-naar-ienw/Hoe+kijken+stakeholders+naar+IenW.pdfhttps://www.kennisopenbaarbestuur.nl/media/250505/ABZKKTO15_rapport.pdf https://open.overheid.nl/documenten/ronl-8160fcb6-b896-4d32-bb7c-a7e6bf7cc089/pdf