Peter Essers: “As a tax specialist, if you don’t consider the people affected by the law, there’s every chance things will go wrong”

Where does your interest in taxation come from? 

It all started as a student of economics right here at Tilburg. As my studies progressed, I was inspired by the practical effects of economics and law, by which I mean their impact on citizens, businesses, and society. I came to realize that the government can play a very important role in the lives of ordinary people, for better and for worse. And tax law is the area where that influence is at its strongest.

In those days, fiscal economics was a field with very few students and faculty: everyone knew everyone else. It was a great environment in which to learn. Jan van Dijck and Chris Geppaart were the inspiring luminaries of the day. They set the tone. But I also learned a lot from Theo Stevers, who taught public finance. He put a firm emphasis on the combination of politics, economics, and law. In fact, he was the main reason why I opted to focus on tax law. A decision I’ve never had cause to regret.

You only have to look at the recent childcare benefit scandal to see how fundamentally the tax authorities can impact the lives of ordinary people

Other aspects that set Tilburg apart were the focus on critical thinking and fiscal ethics. They were drummed into us from day one. You only have to look at the recent childcare benefit scandal to see how fundamentally the tax authorities can impact the lives of ordinary people. Unless you’re aware of that as a tax inspector, you can do a lot of harm. Everyone involved in that scandal may have acted with the best of intentions but, as part of the system, things can still take a wrong turn. 

I also saw strong evidence of this in my research on the Dutch Tax and Customs Administration during World War II. I come from Margraten – home to the American War Cemetery – so growing up, the war was always very close. That research project really brought the power of the government home to me, especially when it comes to taxation. After all, the tax authorities have access to the personal details of every citizen. And those details were of great interest to the Nazis during the occupation. 

How did the Nazis make use of that information?

The influence of the Nazi occupiers on the Dutch tax system was greater than I thought. During the occupation, Dutch tax officials took the opportunity to implement reforms which would previously have foundered due to lack of political support. That’s where the origins of our income tax and corporate taxes lie. Until that time, the Netherlands was something of a tax haven, like Switzerland used to be. With the permission of the Germans, Dutch officials were able to make those changes, but without stopping to think that what is good in peacetime may not be at all good in wartime. After all, the increase in tax revenue ultimately benefited Nazi Germany, not the Netherlands. In addition, those same officials abandoned the requirement of confidentiality, which meant that all data on Jews and other persecuted minorities found its way to the central German leadership. That caused a huge amount of harm. 

The sole purpose of civil servants was to apply the law

The Jews, for example, were required to transfer their savings to a German bank – Lippmann, Rosenthal & Co, Liro for short – and needed special permission to access their accounts. But the Dutch tax authorities continued to tax those funds, under the motto ‘the law is the law’. Meanwhile, the Supreme Court did nothing to prevent such practices. The tax authorities also struck a deal with the Germans to buy off Jewish tax debts with a lump sum from those Liro accounts. As if that wasn’t enough, the few Jews who returned after the war were also hit with assessments for tax arrears. 

That was the mentality in those days: the sole purpose of civil servants was to apply the law. Positive discrimination was out of the question. That cold-heartedness was hardwired into the system. But even nowadays, if you take a purely fiscal approach as a tax specialist, without considering the people affected by the law, there’s every chance things will go wrong. That’s what happened with the childcare benefit scandal, where parents who made one small mistake were forced to pay everything back. 

You were a member of the Senate when all this was going on. Did no one take the warning signs seriously?

That all-or-nothing policy was not enshrined in the legislation, so the Senate never signed off on that. But we should have asked more probing questions when the complaints began to surface. I made a point of asking whether they weren’t going too far and causing innocent people to suffer, but the State Secretary at the time replied that action would only be taken if fraud had actually been committed. As it turns out, that was a principle they failed to comply with.

Didn’t the academic world pick up on it?

By the time we started paying it attention, it was too late. I followed the hearings closely: the reasoning people used and the way they passed the buck was astounding. There was even a system that rewarded people who collected the most in fines. I was taken aback by the situation during the war, but I was taken aback by this too. 

Ethics are essential: people need to have the courage of their convictions and take personal responsibility

The benefit fraud among Bulgarian migrants did all kinds of harm. Abuse was dealt with harshly, but that had nothing to do with the majority of people who received benefits. The authorities keep trying to talk their way out of it or only admit collective guilt, which means there’s no one to pin the blame on. But you can pretty much retrace where things went wrong. We have so much to learn from this case. Here, too, ethics are essential: people need to have the courage of their convictions and take personal responsibility. Very few have done so. 

Did you become a Christian Democrat senator because you wanted to combine politics and economics?

It was never my ambition to be a senator; for me being an academic is the highest calling there is. But I was approached by the Christian Democrats because their Senate tax expert at the time was retiring. I must say that the Senate is a good place for an academic; it’s less political than the House of Representatives. I was able to share a lot of knowledge about fiscal principles and learn a great deal into the bargain. Fortunately, I never had to say anything I didn’t support. In that case, I would have given up my seat.  

How did politics, economics, and law come together in your research? 

The relationship between the government and ordinary citizens was always there. The government likes to create clarity by coming up with legislation that covers every eventuality, but that also makes things very complicated. This challenges companies to test the limits of the law, through improper use of tax schemes in investment constructions, for example. Sometimes a more open-ended approach to legislation is better, leaving it up to the courts to set the limits, but citizens also need legal certainty. The tension between the two has always fascinated me. World War II and the childcare benefit scandal are two examples of when things went off the rails. 

I also gave students the chance to do this kind of research. They examined the deal between Rabobank and Philips in which Rabobank bought the know-how for making CDs and leased it back to Philips. This construction allowed Philips to gain much-needed liquidity and offset past losses for tax purposes. 

You have to understand each and every perspective; only then can you make a sound judgment

Much has been made of this ‘techno lease’ case. One of my supervising professors, Jan van Dijck, had given a positive opinion on the deal to Minister Andriessen of Economic Affairs, who wanted to save Philips. In interviews, my students encountered many frustrations from politicians and officials who had not been consulted or informed. We also obtained access to Van Dijck’s computer, thanks to his son; I was able to guess the password – a real stroke of luck! Our conclusion was that he shouldn’t have succumbed to the pressure to write an opinion in one night, especially since it seemed to us that the file which formed the basis for his assessment was not complete. 

We re-enacted the drama in a roleplay and published a reconstruction in book form. You have to understand each and every perspective; only then can you make a sound judgment.

And what are your plans for the future?

In addition to chairing the Netherlands Tax Science Association and the editorial board of a weekly review on tax law, I will continue my research. In my valedictory speech, I also plan to combine fiscal and historical research, from the French Revolution to Box 3 of the Dutch tax system. A fruitful combination!

Publication date: 15 maart 2024