Large parts of government finances will be at risk within three years due to the seriously delayed renewal of crucial ICT systems at the Tax and Customs Administration. This was written by external ICT experts who investigated this innovation. They confirm internal analyzes by the Tax and Customs Administration, which are in the hands of NRC. The continuity of taxation is at stake, now that the Tax and Customs Administration appears to be failing to replace outdated technology in time, according to the experts.
It concerns the systems for payroll tax, with which the Tax and Customs Administration collects more than 150 billion euros in taxes and premiums for national, employee and health insurance annually. That is almost half of the total government revenue. The income tax system is also at risk. On this basis, about 20 billion is added annually inside and the Tax and Customs Administration pays billions to citizens.
Read also: The situation at the Tax and Customs Administration is critical
The so-called Cool:Gen platform, on which the most important ICT systems for payroll and income taxes run, will no longer be technically supported from the end of 2026. It is therefore “necessary” that these systems be “replaced before 2027”, according to an internal memorandum that State Secretary Marnix van Rij (Taxation, CDA) received in July last year.
If the old software is not replaced in a timely manner, there is a risk that unsolvable errors or malfunctions will occur in the system. “Then this means that the Tax and Customs Administration can no longer impose tax assessments on the taxpayer and that cannot be collected,” warn officials. In addition, “legal amendments to income tax are no longer possible”.
‘Very high risk’
Consulting firm CapGemini – which was commissioned by the Tax and Customs Administration to investigate the government’s plan for a renewed wealth tax in Box 3 – called the problematic replacement of this outdated technology for levying income tax a “very high risk”. In August, the company wrote that the replacement of the old systems was delayed by a year. “There is a risk that due to further delay, the deadline for complete phasing out […] becomes unfeasible. […] As a result, the levying of income tax is jeopardized because, for example, system errors cannot be resolved (in time).
The renewal of the payroll tax system faces a similar problem. This one was “virtually shut down”, wrote the ICT Assessment Advisory Board to State Secretary Van Rij last July. Due to mismanagement, the innovation was “in fact still in the start-up phase after a year and a half […] We therefore expect that the program will not be able to replace Cool:Gen before 2027.” According to the Advisory Board, which advises the cabinet on major ICT projects, the continuity of payroll taxes was ‘in jeopardy’ as a result.
The Tax and Customs Administration already warned the Ministry of Finance in 2020
Van Rij stated in a response to recognize ‘largely’ the conclusions of the Advisory Board. But the Tax and Customs Administration is making improvements and, according to him, is “confident that the targets will be achieved in 2027”. The Ministry of Finance failed to respond to further questions from NRC within two days.
The Tax and Customs Administration already warned the Ministry of Finance in 2020 that the ICT systems within the payroll tax system urgently needed to be modernized, according to internal documents. Failure to do so would “impact the continuity of public finances and crucial data flows”.
Employment and benefits data
The importance of the so-called wage tax return chain, in which the highly outdated ICT systems play a crucial role, cannot be underestimated. The government itself describes it as “the financial and data aorta of Dutch society”, because 30 billion data are collected here every year. This concerns, for example, all employment and benefit data of 13 million citizens, which are also used by hundreds of other public and private organizations, including the UWV and Statistics Netherlands.
The lack of innovation is not only a technical or financial problem. It also stalls the implementation of important political wishes – such as compulsory disability insurance for the self-employed, or the introduction of a tax on the actual return of large assets.
Read also: Restoration operation Allowances not ready before the end of 2026
The internal memorandum that Van Rij received stated that, despite all the delays, the plan was to finish replacing the old software before the end of 2026. But that memorandum also states that because of the tightness on the labor market, “the ambition to catch up will have to be adjusted at a later time”.
Next week, the House of Representatives will receive a technical briefing on the status of ICT at the Tax and Customs Administration. Van Rij had previously planned to send a letter to Parliament about ICT in the run-up to this briefing, but has now postponed this until after the briefing.
A version of this article also appeared in the newspaper of February 16, 2023