More than a levy: VAT as a key to digitisation, internationalisation and a sustainable society

Merkx also found Dutch law interesting but chose Tax Law as a young student. In tax law, it was sales tax that gave the sparkle. "VAT fascinates me because it is about entrepreneurs and their products. Also, social developments often affect VAT", Merkx says. "An example is the wish for circular construction. If contractors start reusing materials, how does this affect VAT compliance? Moreover, there is a clear system in this form of taxation. If you follow the relevant steps, you can solve any case. I always teach that to my students as well."

After Merkx’ graduation and PhD in Tilburg, she came via Leiden to Erasmus School of Law. In February 2020, barely a few weeks before the corona crisis erupted, she gave her inaugural lecture as Professor of Indirect Taxes. Her research focuses on VAT in relation to digitalisation, globalisation and sustainability.

Digitalisation and internationalisation

“Change is the only constant,” Heraclitus once said, and that certainly applies to Merkx’s domain. A world that is becoming more international and digital is constantly bringing new challenges in the field of VAT. “A fundamental question, for example, is: if consumers order a service or product abroad, where is the tax levied? In the past, the purchase was often taxed in the country where the product came from, i.e. where the entrepreneur is established. Nowadays, this usually happens in the country where the consumer lives. In my research, I study the new rules and issues that this change brings with it.” “When you change the place of delivery or service, you then run into another problem,” the professor continues. “Take, for example, the Spanish entrepreneur who now suddenly has to pay VAT in the Netherlands. How do you ensure that he actually does so? We use insights from behavioural sciences for this. And how are you going to monitor and enforce as a member state of the European Union? You can use technology for this. The EU has a proposal on, among other things, e-invoicing en digital reporting, whereby entrepreneurs will report data to the tax authorities in order to detect fraud as quickly as possible. This proposal may have been adopted by the time this magazine is published. Some Member States require an almost realtime-reporting of certain transactions. However, we must look critically at fundamental rights and legal protection of the citizen, in this case the entrepreneur.”

"Societal developments often have implications for VAT." - Madeleine Merkx

Can the set-up of the VAT system contribute to a more sustainable society? 

Merkx has already published widely on the tax aspects of the circular economy. She is also investigating how VAT measures can encourage the use of electric vehicles. And a new project, tellingly called Tackling fixophobia, will start later this year. "We want to know how to encourage people to get broken electronics fixed and not buy something new straight away. We are looking at this from all sides. TU Delft is studying design aspects of products and Maastricht University is looking at which business models can help give products a longer life cycle. In addition, Wageningen University & Research is studying what marketing or service interventions can take place to encourage consumers to make repairs. We at Erasmus School of Law want to identify which barriers we can remove in existing regulations and whether certain future legislation is necessary. And perhaps the results from Delft, Maastricht and Wageningen have implications for legislation again. We are investigating that too. And not only in the field of taxation, but also in contract law and consumer law, for example. So it will be an interdisciplinary research with which we really hope to make an impact."

Ambitious School

Merkx has an overloaded schedule. Besides being Professor of Indirect Taxes, she is partner Tax & Legal at the academic office of BDO Accountants & Advisors and judge at the District Court of Noord-Holland. Previously, she gained extensive experience in advisory practice at Deloitte Netherlands. All this she brings with her to our School. “It makes sense to involve matters of practice in teaching and research", she points out. "For example, in our Indirect Taxes Master's course I teach the Formal Aspects of Indirect Taxation, where I deal with the topic of objection and appeal in court. My experiences with proceedings at BDO come up in the lecture room. So a nice mix of theory and practice."

The Professor feels at home at our School: "We are very ambitious. In research, we do not usually limit ourselves to analysing laws and regulations but try to see them in a broader context. That makes Erasmus School of Law socially very relevant."