Identity theft – a loss or an excuse for tax fraud?

Losing a house due to identity theft

A controversial story related to identity fraud has shaken a small village in the Netherlands in the province of West Groningen, where a house of a former local butcher was seized by Dutch tax authorities and listed for sale on a public auction due to tax avoidance. The measure was taken after the butcher refused to provide information about his secret bank account in Luxembourg, which was allegedly used for storing a large amount of non-declared income. The butcher claimed that neither he nor his partner held any secret bank accounts in Luxembourg for money laundering purposes and the couple became a victim of identity fraud.

What is identity fraud?

Identity fraud is a crime committed when personal data of an individual is stolen for the purpose of committing further financial crimes in the name of the victim. This type of fraud is especially widespread in the cyberspace, where crooks obtain identity or payment details from Internet users by means of phishing, romance or rental scams, and other types of cybercrimes. The stolen personal data is later resold or used directly for purchasing goods and services online, opening banks accounts, filing fraudulent tax returns, and other illicit purposes. Identity theft may have severe and long-lasting consequences for victims. On the other hand, identity fraud can be used as an excuse to defend against charges related to financial crimes.

Identity fraud vs. tax fraud

In 2000, the Dutch tax authorities received a list of clients of the Luxembourg Credit Bank. The list was stolen and handed over to the authorities by an ex-employee of the bank. According to the list, the Dutch butcher, together with his girlfriend, held an undisclosed savings account in the Credit Bank in Luxembourg that contained about 250.000 guilders (the former currency of the Netherlands).After discovering the undeclared bank account, the tax authorities repeatedly requested the butcher to reveal more information about the secret savings. However, the butcher kept claiming that he had absolutely no knowledge about those funds. As a defence, the alleged tax fraudster claimed that, in the ’80s, his own and his girlfriend’s passports were stolen from a car and the documents may have been later used for illegitimate purposes, such as opening and maintaining the bank account in question. The butcher was disappointed and frustrated because the tax authorities did not want to believe his story.The case was brought to court and, in 2014, the court in Arnhem-Leeuwarden declared (case 200.139.110-01) that the story about the identity theft was unbelievable and ordered the butcher to pay EUR 500.000 of penalties. The court stated that the couple’s argument that they “are the victims of identity fraud and that the perpetrators of the fraud have used their identity data for the purpose of opening and holding the bank accounts was not plausible.” Taking into account that the butcher is not capable of paying the penalty, his house was seized and listed for sale in an auction to cover the debt.

 Merciless for black-savers 

Commenting on the case, the spokesman of the Dutch tax authorities stated that the institution cannot focus on each individual case and “it is everyone’s duty to contribute to the society through taxes. Anyone who refuses this, such as black-savers, will be dealt with”. The spokesman added that the sale of butcher’s house is not the only case related to black-savers and a number of other houses will also be brought for sale through an auction as a result of unpaid taxes.