Rethinking Tax Policy to ensure Fair Taxation in Society

In both society and science, there are many fundamental questions about the need to (re)design tax systems to address the challenges and opportunities raised by the contemporary global landscape. These questions are raised, among other things, by the ever-advancing digitalisation of the economy, evolving work patterns and the rise of Artificial Intelligence (AI), the mounting calls for a fairer allocation of taxing rights and more inclusive international tax governance frameworks, the continuous discussions about the appropriate ‘tax mix’ and whether countries’ should tax income, labour, capital, consumption, or wealth, the growing role of taxation in promoting innovation, competitiveness and the green transition, etcetera.

What these different issues have in common is that they all embody a growing societal demand for 'fair, inclusive and sustainable taxation'. Such important societal demand merits academic attention and justifies placing a greater focus on the fundamental tax policy issues that societies are facing within all the International, European and Dutch landscapes.

From a substantive law point of view, key questions are, among others, whether tax bases should be adjusted (i.e equity in the relationship between all citizens and the State: what should be taxed?) and how the tax bases should be divided between States (i.e. what is fair in the relationship between States?). There is also a procedural component (i.e. decision-making and legal protection) to be considered, which includes assessing the decision-making fora and procedures on international and European tax law (for example, whether the OECD or the UN should be the forum where all big and small countries discuss and decide on global tax policy). Furthermore, legal protection is also relevant here, as taxation does not operate in isolation, but in the context of (and in interaction with) the broader legal system and other specific fields and frameworks such as international investment law and bilateral investment treaties.

Above considerations have resulted in the following research areas. It is important to highlight that these areas are not isolated compartments. Because the topics covered by them share common elements and are closely interrelated, research will also focus on their interactions and overlaps. Furthermore, where appropriate, research on these topics will integrate perspectives from colleagues in other disciplines relevant to the specific tax issue, with the objective of achieving an interdisciplinary research approach.

Research Area A: Fair Distribution of Tax Burdens (Equity between Taxpayers)

Solid tax systems rely on a principled approach and taxpayers’ trust in and acceptance of the tax system. This means that taxation must also be perceived as fair from the citizens' perspective. Research Area A aims to evaluate the extent to which the current Dutch tax system (with particular attention to the overall balance in the taxation of managing directors and major shareholders (DGAs) and self-employed entrepreneurs (IB-entrepreneurs), the balanced taxation of capital income in Box 2 and Box 3, and inheritance and gift tax) aligns with fundamental tax principles and contributes to or detracts from a fair distribution of the tax burden, and to make recommendations for reforms towards a more balanced and fairer tax system.

Research Area B: International Tax Equity (Equity between States)

The international tax system and its governance are undergoing a significant transformation. First, the OECD's BEPS 2.0 initiative, the surge of unilateral measures like Digital Services Taxes (DSTs), and the growing role of the European Union and the United Nations in international tax governance
reflect shifting power dynamics and normative contestation in certain aspects of global tax policy. While the OECD remains at the forefront of international tax reform discussions, the uncompromising stance of the United States in the BEPS 2.0. project is jeopardizing multilateralism and weakening the OECD’s role as the leading global forum for tax policy. At the same time, the European Union (historically a frontrunner in adopting OECD measures) is now focusing on developing its own policies to safeguard its specific interests, while small and developing countries (often underrepresented in key decision-making bodies) are actively working for a more inclusive and equitable international tax system via the United Nations. These geopolitical changes and tensions are evidently shaping ongoing international tax reforms and governance dynamics.

Research Area B examines the legal and institutional frameworks shaping both:

1. The allocation of taxing rights among jurisdictions (including bilateral tax treaties; BEPS 2.0 and unilateral tax measures like DSTs; the interaction between taxation, international trade-investment law and treaties; the taxation of mobile workers, wealth, capital, and high-net-worth individuals; etc.); and
2. International and European tax governance (including the UN framework convention on international tax cooperation, the EU treaty or constitutional dimensions of EU competences in the field of taxation, etc.).

The aim of this research is to ensure that, despite current tensions between unilateral, bilateral and multilateral approaches to tax policy development, these complementary legal frameworks remain fair and inclusive.

Research Area C: Compliance and Taxpayers’ Rights Protection

Research Area C focuses on ways of improving tax compliance, transparency and enforcement measures while ensuring the effective protection of taxpayer’s fundamental rights under international, European and Dutch law.

Effective taxation is conditional on a solid tax system and on citizens’ trust in the tax system and in the protection of their rights. Issues regarding taxpayers’ fundamental rights and general legal principles are amplified by countries’ international tax cooperation efforts to fight tax evasion and avoidance, improve tax transparency and ensure effective tax compliance and enforcement. These efforts are visible, for example, in the fields of data collection, cross-border information exchange and cooperative compliance programs. While these measures evidently pursue a worthy goal (i.e. enhancing tax compliance and fighting tax evasion/avoidance), they also raise legal concerns regarding taxpayers’ fundamental rights and general legal principles, including privacy, data protection, proportionality, etc.

The measures to be assessed include, among others, information reporting and tax collection regimes, voluntary and/or cooperative compliance initiatives, exchange of information frameworks, measures requiring the (public) disclosure of taxpayers’ data, tax enforcement procedures and the application of tax penalties, etc. both in the fields of direct and indirect taxation (VAT, Customs, etc.).

Research Area D: Competitiveness and Sustainability (Digitalization, Innovation, and Environmental Sustainability)

The rapid advancement of AI and other technologies, evolving work patterns, and the increased global mobility of individuals are significantly transforming our societies, raising completely new challenges and opportunities for taxation. For AI and emerging technologies, these include, among others, determining how tax systems can ensure that AI is responsibly used by tax administrations, assessing how taxation could help promote technological innovation and competitiveness, analysing how technologies could help in making compliance seamless and tax systems more fair, simple, environmentally sustainable, and fraud-proof, etc. Regarding changing work patterns and global mobility, key tax issues involve determining individuals’ tax residency, preventing double or non-taxation, allocating income between countries, and addressing corporate, tax compliance and transfer pricing issues.

Research Area D explores how the international, European and Dutch tax systems could be adapted to the digital and AI-driven economy to remain fair, inclusive, sustainable and fraud-proof. Among other things, this research examines how tax policy can foster digitalization, technological innovation and competitiveness while supporting environmental goals, whether (and how) tax system should treat AI and/or income arising from digital environments, the tax implications of ‘zero-person companies’ (entirely operated by AI agents), the taxation of cross-border e-commerce via, for example, the introduction of handling fees or duties on small consignments/packages, etc.