معرفی یک دادگاه تجدید نظر در دعاوی قضایی مالیاتی هلند

As of January 1, 2005, a court of appeal has been introduced in Dutch tax litigation. Before that date, the substantive merits of a tax dispute could only be heard in one instance. In this paper we investigate which consequences the introduction of the appeals court may have for the way tax payers and the tax administration solve their disputes. We focus on the following questions. Are more or less tax payers willing to go to court to solve the dispute? Is it more or less difficult for parties to agree upon a settlement? Which appeal rate can we expect? What is the role of society's confidence in the courts in the answers to the questions above?

In the Netherlands, a tax payer who wants to dispute his tax assessment first has to file a notice of objection at the tax administration itself. If at the end of that procedure he still disagrees with the final assessment, he may go to court. Before January 1, 2005 the tax payer had to bring his case to the tax section of the Court of Appeal (‘Gerechtshof’). In the Netherlands, this was the only instance which considered the substantive merits of the case. Neither side could appeal the judgment of the court on the grounds that the court misjudged the facts. Since January 1, 2005, things have changed. Tax disputes are first brought to a District Court (‘Rechtbank’). After its verdict, both parties have the option to appeal on substantive arguments. The ‘Gerechtshof’ now hears tax cases in second instance. The goal of this paper is to gain insight in to the consequences of the introduction of an appeals court for the choices made by the tax payer and the tax administration in solving the dispute. Of course, the possibility to appeal increases the number of options open to the players. The option to appeal can be an advantage, when the first trial is lost. But it can also be a disadvantage, when the first trial is won but the other party does not give up. Moreover, when players go to court for the second time, they face additional costs. We are especially interested in the following questions: 1. Are tax payers more or less willing to go to court over the dispute? 2. Are players more or less likely to settle their dispute? 3. To what degree will players appeal the decision of the court of first instance? 4. How does society's confidence in the courts affect the answers to the questions above? There seems to be no economic literature in which the decision to go to court in the first instance is modeled together with the possibility to appeal. The papers which study the appeals process focus on the internal organization and dynamics of the judicial system, not on the choices by the parties in the dispute. For example, Shavell (1995) investigates how the judiciary should be arranged in order to minimize the combined costs of a mistake in the last verdict and the legal costs to all parties. He finds that a court of second instance can be beneficial, if (i) the court of second instance gets relatively more means so that it is more reliable than the court of first instance, (ii) parties get the option to appeal or not, and (iii) the proper (dis)incentives to appeal, via court fees or subsidies, are in place. Spitzer and Talley (2000) analyze the policy choices that the higher court could make in reviewing verdicts of lower courts when lower courts may not only make mistakes, but may also have an ideological bias. Daughety and Reinganum, 1999 and Daughety and Reinganum, 2000 analyze how later verdicts in a case are affected if the information contained in the earlier verdicts and the decisions to appeal are taken into account. In this paper we look at the connection of the courts in the first and second instance from the other side, namely from the perspective of the parties in the dispute. How is the decision to go to a court of first instance affected if players may appeal its verdict? The paper is organized as follows. In Section 2 we introduce the general set-up of the model. Section 3 briefly discusses the old situation in which no appeal was possible. Sections 4 and 5 analyze how the new situation differs from the old one. We will see how the outcomes are affected if players learn about their chances in the court of second instance from the verdict in first instance. We also discuss the role of society's confidence in the courts. Section 6 summarizes the results and draws attention to some relevant aspects that have yet to be built into the model.

As of January 1, 2005, a court of second instance has been introduced in Dutch tax litigation. In this paper, we extended the standard divergent-expectations model to study the consequences for the handling of disputes between tax payers and the tax administration. We further extended the model by dissecting the players’ probability estimates of winning in court into two components: (i) players’ beliefs about the intrinsic merits of the case, summarized in probability estimates of being right, and (ii) society's level of confidence in the courts, summarized in probability estimates of the courts delivering correct verdicts. Where non-linearities and a large number of model parameters prevented us from deriving analytical results, we employed numerical simulations to supplement the analysis. In general, it appeared to be unclear whether tax payers will take action against a tax assessment more or less often after the second instance has been introduced. This depends on the actual joint distribution of the players’ probability estimates. What we can say is that, given this distribution, players will less often go to trial than before. In other words, players should jointly be more optimistic before they go to court. The model further predicts that the appeal rate equals one, when the players are naive; but when they learn from the verdict in first instance, the appeal rate may vary from zero to one. Society's confidence in the courts affects the results in several ways. If the confidence in the courts is perfect, the verdict of the first court will be accepted by the players as the right one; the appeal rate will be equal to zero. Moreover, far-sighted players will act exactly as in the old situation without the appeals court, for they know ex ante that all players will abide by the verdict of the first court. The results are different when the confidence in the courts is less than perfect. For one thing, the range of values that the players’ probability estimates of winning in court can adopt is limited by the level of confidence in the courts’ verdicts. Further, players’ joint optimism (if any) appears to be lower if the general level of confidence in the courts is lower. Fewer cases go to court in the first stage, but the appeal rate is higher. Subsequent empirical analysis should point out whether and in how far our model fits reality. Alas, it will take several more years before data have accumulated that will permit a first test. To complicate matters: our model starts from existing tax disputes. In other words, the substantive tax laws are considered given. Naturally, these change over time too. That brings us to our final observations. Several elements which may be relevant for a full appreciation of the introduction of an appeals court, are still missing from our model. First, the judgment of a court also depends on case law. The court's verdict in a case may become legal precedent for similar future cases. Tax payers are most likely one-shot players in the terminology of Galanter (1974), who generally will not expect to get involved in a similar tax dispute again. But the tax administration is a repeat player. In a simple model with one instance the effects of legal precedent are relatively clear. Because the tax payer (P) is a one-shot player, he is only interested in the outcome of the dispute at hand. The tax administration (A) however knows that if it goes to court now, it may never have to do so again on the matter, because tax payers in similar future cases will know how the court's verdict will read. Therefore, if A expects similar cases in future, the expected benefits to A of going to court are larger, while the expected costs are the same. Hence, players are less likely to settle; they will end up in court. Upon the introduction of an appeals court, however, the analysis becomes more complicated. Are verdicts of courts in first and in second instance equally important in case law? And if they are not, which weight (if any) is attached by the appeals court to the verdict of the court of first instance? If players expect that the verdict of the appeals court depends (to some degree) on the verdict in first instance, then players will realize that their chances in the appeals court depend on whether they won or lost in the court of first instance. Hence players should condition the estimates of their chances in second instance on the outcome in first instance. Such an analysis is outside the scope of this paper. Second, from the literature on tax evasion (cf. the review by Andreoni, Erard & Feinstein, 1998) we know that non-compliance can be discouraged by raising the expected penalty (by increasing either the fine or the audit probability). In that perspective we should verify whether the introduction of a second instance might affect the attractiveness of tax evasion. If the tax payer (P) gets caught at evading taxes, the tax administration (A) will charge him for an amount (Y) equal to the amount of taxes evaded plus some fine. Because the tax payer knows that he is wrong (tax evasion is intentional), he will have relatively little faith in the merits of his case. The tax administration, in contrast, will have relatively much faith. According to our model, it is more likely then that the tax payer has no credible threat and will give in. Which would help to discourage tax evasion. But there may also be another effect. When tax inspectors would be forced to spend more time in court, first and second instance combined, there would be less time left for detecting fraud. The net effect remains unclear without more information. Finally, a substantial strand of the literature gives asymmetric information as an explanation for cases in court. See for instance Bebchuk (1984), Reinganum and Wilde (1986) and Daughety and Reinganum (2005). When players cannot verify each other's information, asymmetry in information may lead to different probability estimates to win in first instance. But once all information is revealed during the first trial, there is no asymmetry in information left in second instance. Hence, if all differences in the probability estimates were due to asymmetric information, players will end up sharing the same view on who is going to win in appeal. But then they will not go to trial in the second stage. In this respect it is worthwhile to note that parties in an appeals case may only rely on evidence that was used in the court of first instance and on new evidence which that party did not have before. Concluding, in as far as differences in players’ probability estimates result from asymmetric information, and given that this asymmetry is removed in the court of first instance, the appeal rate will be zero.