The Temporal Effect of Dutch Tax Court Decisions

Abstract

In this contribution we explor transitional tax law in the context of judicial repositioning. While the Dutch tax courts’ primary duty is to interpret tax legislation, they sometimes create law more autonomously, for example, by ‘deputising’ for the legislator or in the context of protecting the taxpayer’s legal rights against the legislator or the tax authorities.Judicial shifts are fairly rare events and when a major one occurs the court concerned must decide on the temporal effect of its decision. It usually opts for direct application of either the new interpretation of the law or of the newly shaped legal rule. The new precedent is then applied to all cases where the taxpayer’s tax assessment is not yet irrevocable. Sometimes the courts impose transition measures to prevent the taxpayer or the tax authorities from having to resolve difficulties that have come about through the transition from old to new rules. They adopt transition measures to mitigate the retroactive effect of their decisions.The Tax Division of the Supreme Court has imposed a transition measure on a number of occasions, most often that of prospective overruling: the Court limits the temporal effect of its decision by restricting the application of the new legal rule to future cases. Such a limitation requires compelling justification, such as an anticipated disproportionate budgetary impact of court decisions on public revenue.