On May 7, 2014 the District Court in the The Hague rendered judgment on seven individual proceedings concerning the crisis levy. The 16% crisis levy payable by employers in April 2013 relates to employee salaries that exceeded EUR 150,000 in 2012. No settlement agreements had been concluded with the Dutch Tax and Customs Administration with regard to these individual proceedings, and they will not have a flow-on effect for the pending test cases.
The seven cases were all dismissed. The conclusions reached by the District Court can be summarized as follows.
Payroll tax aspects
According to the District Court, payroll tax may be levied twice on the same salary component (in respect of both the employee and the employer). The Personal Income Tax Act 1964 explicitly states that the crisis levy is levied on top salaries in derogation of the Act’s other tax measures. Even director-major shareholders, for whom a salary higher than EUR 150,000 is generally the norm, are subject to the crisis levy. After all, the tax base is the actual salary paid.
The District Court recognizes the retroactive effect of the measure. According to the District Court, the government has remained within its broad discretionary powers. The court regards neither the crisis levy, nor the choice to levy it over the salary received in 2012, as unreasonable. In coming to this conclusion, the court took into consideration the fact that the crisis levy is only one part of a package of measures introduced to reduce the budget deficit.
The principle of equality
The District Court concluded that it was possible for the government to opt for a levy that only applies to employers and still remain within its broad discretionary powers. To the extent this leads to the unequal treatment of equivalent situations, the court considered that the unequal treatment could be justified.
An individual and excessive burden
The District Court ruled that the plaintiffs had failed to convincingly demonstrate that they were exposed to an individual and excessive burden. In reaching this conclusion, the court took into consideration the high annual profits posted by the plaintiffs (varying from EUR 4 million to more than EUR 2 billion). Even in a loss situation, an individual and excessive burden was not regarded as being present, given the profit reserves held.
How to proceed?
Although the judgment in the individual proceedings does not favor the employers that are parties to the test cases, the judgment is only a first step, and it will be appealed. It is expected that the test cases be dealt with by the court during the course of this year. We recommend that a notice of objection also be filed for the crisis levy in respect of salaries above EUR 150,000 received in 2013. An additional argument that can then be put forward is that the one-off crisis levy ultimately proved not to be a one-off event. KPMG Meijburg & Co is prepared to file the notices of objection against the crisis levy for 2013 on behalf of employers. Please feel free to contact us, should you wish us to take advantage of this offer.