New ‘zero tolerance policy’
It appears that the Aruba tax office has implemented a ‘zero tolerance policy’ on the timely payment of sales taxes (belasting op bedrijfsomzetten BBO, belasting azv BAZV, and belasting avp BAVP). The exact date of implementation is not clear.
A stricter policy would aim to drastically increase tax revenues in order to compensate for political campaign promises, among others no taxation of old-age pensions, as well as to reduce the financial deficit of the country.
Good public governance rules
On the basis of the stricter policy, all late payment and late filing of sales tax are met with additional assessments and fees without restriction. Lawfully, the tax office has the right to enforce the tax laws at its discretion. However, in doing so the tax office is bound to good public governance rules (algemene beginselen van behoorlijk bestuur) which guarantee a fair treatment of the taxpayer.
The rules pertaining to good public governance consist of among others i) the principle of legitimate expectation (vertrouwensbeginsel), ii) the principle of legal certainty (rechtszekerheidsbeginsel), iii) the principle of proportionality (proportionaliteitsbeginsel) and, iv) the prohibition of the misuse of powers (verbod van detournement de pouvoir). These principles are discussed below.
Legitimate expectation and legal certainty
Until recently, only exceedingly late filing and payment of sales taxes were met with additional assessments and fees. Late filing and payment of no more than a couple of days over the deadline of the 15th of each month was permitted, as emphatically told to taxpayers by tax officers. At some point, the tax office transitioned to a stricter policy without prior notice to the public (as confirmed by several reliable sources) which, in combination with a delay in the processing of tax returns by the tax office, effectively results in a retroactive fining ofall late filings and payments. This would be in conflict with what the taxpayer may reasonably expect, i.e. that he can pay and file a couple of days late without facing retribution. Switching to a new stricter policy without prior notice would also be in conflict with the principle of legal certainty.
Proportionate sanctioning and using the law solely for its intended purpose
The application of additional assessments and fees without restriction may be disproportionate in case the payable tax amount is relatively small (e.g. a penalty of Awg 1,200 over a tax amount due of Awg 400) and the transgression innocuous (e.g. 1 day late payment). Moreover, imposing additional assessments and fees is intended to force the taxpayer to file and remit timely payment of taxes, and not solely (or mainly) to increase tax revenues which appears to be the primary objective of the tax office.