The inspection of Large Companies: the cat and mouse strategy or the Horizontal Monitoring Model (HTM)

The complexity of the control of large multinationals in a world of internationalization of the economy at the end of the last century, and the use by some multinationals of aggressive tax planning with several scandals, to transfer the tax bases to reduce their tax burden , was a wake-up call and a great challenge for the world’s tax administrations.

The traditional or “vertical” control began to be questioned as it was reactive (cat and mouse strategy) and was based on an “ex post” action on complex operations with scarce human resources. For companies, the risk was the lack of legal certainty of their tax situation due to the possible review of their operations by the Tax Administration.

Faced with this situation[1], the Netherlands irrupted onto the scene creatively by implementing, in 2005, the so-called Horizontal Tax Monitoring Model (HTM), based on cooperation with companies in a framework of trust and transparency. The role of the Tax Administration is proactive[2] “ex ante” of the tax return filing.

In a general framework, it is a voluntary scheme or program, to which taxpayers can adhere, through the signing of an agreement by which they undertake to share their planning with the tax authorities, to allow access to their systems, to adopt rigorous internal control measures and in return have an individualized and specialized team in their interaction with the Tax Administration, and prompt responses to their doubts.

The companies obtained tax certainty from their operations, a good taxpayer image and committed themselves within a framework of trust to a voluntary, transparent and accurate fulfillment of their tax obligations, while the Tax Administration ensured detailed knowledge of the operations and a control of the tax planning[3].

The Dutch model was a forerunner and well-regarded in developed countries, since it follows the guidelines of the Organization for Economic Cooperation and Development (OECD), within the framework of favoring “cooperative compliance”, which puts the emphasis on reducing the active performance of the administration, giving rise to a self-regulatory behavior of companies within a framework of social responsibility.

Beyond the fact that many authors refer interchangeably as cooperative cooperation, we must distinguish conceptually between the services to the taxpayer and the collaborative compliance[4], and both from the Horizontal Monitoring, because they configure various actions from low to high, with their corresponding effects.

The basic objective was large companies with complex operations, which if applied were eligible in the program, as long as they had a correct fiscal behavior in compliance with the TA, that is, they were low risk. Given its success, starting in 2008, the program was extended to small and medium-sized companies.

The country’s economic authorities recognized the success of the program’s[5] strategy and with different nuances and intensity, Australia (Annual Compliance Arrangement –ACA-), the USA began to apply it. (Compliance Assurance Process –CAP-), Ireland, Austria (“Horizontal Monitoring”)[6], etc.[7].

However, as was logical with a new institute, some friction and criticism began to emerge. In the year 2017, in the Report on Investigation of Large Companies (“Rapport Onderzoek Grote Ondernemingen”)[8] and the analyzes carried out by the Tax Administration of the Netherlands (“Belastingdienst”), the following conclusions were reached[9]:

  • that for companies with or without HTM, the number of adjustments of the tax returns of large companies made by the Tax Administration was similar, as well as the absolute and relative total amount of said adjustments.
  • there was no significant difference with respect to the presentation of tax returns and payment on time.
  • companies with origin in the country were more likely to request their inclusion in the program, by contrast the multinational companies, preferably of North American origin, were reluctant to join.
  • The great demand of companies for joining, to demonstrate that they were willing to have a better control, generated an excessive workload that made it difficult to fulfill the annual work plans with each company, given the scarce human resources, which caused that the monitoring of the companies became slower and more expensive.
  • The uncertainty about the level of transparency of the companies also generated friction in the TA-taxpayer relations.

Faced with this situation, 15 years after its application, the Netherlands Tax Administration decided to adjust the program, which is why, starting this year, new guidelines were set[10], namely:

  • Stricter conditions apply to carry out a tax inquiry of international implication.
  • an anonymous summary of the resolutions issued is published.
  • The HTM expired for the 100 largest companies with the most complex operations in the country, which were included in substitution in individual and personalized inspection plans, reinforcing the human resources assigned with the highest qualifications.
  • large companies (not included in the first 100) can continue to adhere to the HTM, but the Tax Administration will increase monitoring actions by imposing stricter demands on internal control measures and carrying out more frequent controls.
  • Small and medium-sized companies will not be able to adhere to the HTM and all the agreements entered into were terminated by the Tax Administration.



The Horizontal Tax Monitoring program created by the Netherlands adapted the Tax Administration strategy to the new context of internationalization of the economy, the high complexity of operations, the need to control tax planning “ex ante” with qualified human resources and grant, in turn, legal certainty to companies.

The “ex ante” control in a collaborative framework represents an advance to avoid the endless tax conflicts and their subsequent litigation that generates the vertical control “ex post”, granting certainty to the companies and greater efficiency in the actions of the Treasury.

While originally the model’ s target was the largest international companies, now it is only large companies (excluding the top 100).

For the top 100 it has been considered necessary to increase the strictness of the control, by including them in a new system for the control of individual and personalized programs, with the assignment of more human resources to control tasks.

Faced with the installed debate on horizontal and vertical examination, the Netherlands has adopted as a current strategy the examination segmented by taxpayer category, namely:

  • the top 100 companies: individual and personalized plans,
  • the large taxpayers: Horizontal Monitoring and
  • small and medium-sized companies: traditional vertical inspection.

The author appreciates the valuable contribution and comment of Alejandro Otero.

[1]“DUTCH HORIZONTAL MONITORING: The Handicap of a Head Start” by Dennis de Widt (2017), Fair Tax, Working Paper Series N ° 13, University of Exeter.
[2]Promotion of Tax Compliance: Cooperative Compliance and the Dutch Horizontal Monitoring Mode”, Hans Gribnau and Esther Huiskers-Stoop (2019), Blogs The Law and Economics, University of Leiden.
[3]They must renounce tax planning not agreed with the Treasury “tax taming” (domesticated planning).
[4]As stated by Luis Cremades Ugarte, Isaác Gonzalo Arias and Esteban David Vargas (2015) in Working Documents of the International Tax and Cooperation Directorate, “Cooperative Tax Relationship or Compliance: Current reality in CIAT Member Countries of Latin America, Caribbean , Africa and Asia ”, Panama.
[5]As Trouw (2017) points out,the Dutch Finance Minister, Eric Wiebis, referred to the HTM as “a strength of our tax system”.
[6]“Horizontal Monitoring in Austria: subjective representations by tax officials and company employees” Janina Enachescu, Maximilian Zieser, Eva Hofmann and Erich Kirchler (2019), Business Research.
[7] “Introducción al Modelo de Cumplimiento Tributario Colaborativo, Principales Experiencias Internacionales y Conclusiones”, José Manuel Calderón Carrero y Alberto Quintas Seara (2017), Revista Análisis Tributario, Enfoque Internacional N° 14.
[8]A comparison was made between 95 large Dutch companies under a horizontal monitoring relationship and 255 large companies under a vertical monitoring relationship.
[9]“Limits of the Dutch Concept of Cooperative Compliance / Horizontal Supervision”, Prof. Dr. PHJ Essers (2017), Tilburg University.
[10]“Netherlands: What Does The New Approach Of Horizontal Tax Monitoring Mean For Your Company” by Joost Van Helvoirt ( 2020), Netherlands, Loyens & Loeff “Netherlands: Tax Controversy 2020”, Goodfried Kinnegim, Friso van Orden (2020), Chambers and Partners.

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