David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: summer travel, part 2.

As we noted in our last episode, summer is a time for travel, and this year we're taking our listeners around the world — with a tax angle, of course. We're talking about the tax systems and tax morale of countries that we're "visiting."

These trips are inspired by a series our international freelancers and reporters wrote a few months ago where they considered the social, political, and historical factors that have shaped the public's perception of paying taxes.

In this episode, we'll be traveling to the Netherlands and Brazil. And if you missed last week's trip to Greece and Italy, you can find that linked in the show notes.

Joining me now is Olaf Geurts, a freelance reporter who writes for Tax Notes. Olaf, welcome to the podcast.

Olaf Geurts: Thank you for having me.

David D. Stewart: Tell us a bit about yourself and where you're based.

Olaf Geurts: I'm based in Amsterdam. I'm a freelance journalist. For Tax Notes [Today] International, I cover all Dutch tax-related developments interesting to our readers. And in general, I report a lot on big companies, multinationals. I've done investigative work, regular reporting work, and stuff like that.

David D. Stewart: Turning to the question that we're talking about today is tax morale around the world. And in your case, we'd like to talk about the Netherlands. So first off, how does the tax system work there?

Olaf Geurts: OK. Well, you've got your regular stack of taxes that are common all around the globe. You've got VAT, sales taxes, you've got corporate taxes, gift inheritance taxes, you name them, and income taxes, of course, which is the most important one. And I'll be talking about the most today, I suppose. The income tax is divided in three boxes. You've got box one, which is income from work. You've got box two, which is income from shareholdings above 5 percent. And then it's box three, which is income from assets such as investment, saving, property.

David D. Stewart: What are the sort of main challenges for the Dutch tax system?

Olaf Geurts: Well, as I soon figured out doing my research for the article, there are a lot. It's been a rough couple of 15 years, so it's where to start. I think one that really garnered a lot of international and national attention was the child allowance scandal, which is sort of tax adjacent of course, but still, it's caused quite a lot of controversy with a lot of child allowance recipients being falsely accused of fraud with sometimes devastating consequences.

But other than that, the tax administration has struggled with a lot of IT issues using very dated software and programming languages. There have been a continuous stream of reports on tax-avoiding multinationals and wealthy individuals and concerns following from that that might inspire, so to say, other taxpayers to think, "Well, I don't need to pay my taxes as well." And then there's the complexity of the system, the hundreds of allowances and deductions and tax regimes that make it harder and harder to comply with your tax obligations to begin with.

David D. Stewart: So tell me about how the Dutch feel about paying their taxes in this somewhat complex system.

Olaf Geurts: Well, when I started researching, I was really bracing myself for a lot of doomsday numbers here. I've been seeing reports warning for degrading taxpayer attitudes for decades, decades back in the late '90s. But actually when you look at the numbers, the tax administration does an annual survey among taxpayers and the results are surprisingly stable through the years. Overall, it still looks like people don't really mind paying their taxes despite all of the problems going on, and some indicators that the tax administration maps even show improvements. So that was a surprising finding, I suppose.

David D. Stewart: Did you get a sense of why that might be?

Olaf Geurts: Yeah, I talked to a bunch of experts and did some digging. And one of the things that the experts mentioned, and which is very characteristic I suppose, for filing your taxes in the Netherlands is how digitalized everything is, it's simply really easy. For decades, the tax administration had a really service-oriented approach where they offered prefilled in tax returns, which just require a couple of minutes to file. I remember when I was a teenager, I had my first side job and then for the first time, I had to file my taxes and I was really dreading it because of course, I knew about all the stories about tax returns. It turned out it was just downloading an app, pressing next, next, next, and it was done. It was just not even a minute's work.

David D. Stewart: Oh, that sounds pretty simple. That's pretty nice.

Olaf Geurts: That was very nice. Yeah. And it still is, I suppose. The tax administration has a lot of information for you at the ready, a lot of details which make it quite easy. And as some experts pointed out, it's quite hard to avoid taxes on income from labor because all that information is simply already passed on to the tax administration. So there's no room to lie for it there.

David D. Stewart: I feel like I should throw an extra question at you here because I'm kind of curious, you had a very simple experience with your first job as a wage earner. You're a freelance reporter now. How is tax compliance for you now?

Olaf Geurts: Well, it's a little bit more challenging of course, because now for tax purposes, I'm an entrepreneur, so that's a lot more bookkeeping to do. But overall, I think it is still relatively simple. It's still a very digitalized form that you fill in once a year and VAT as well, so very digitalized reminders and it doesn't take a lot of time. So, I mean, it's easier when you're a wage earner, for sure. Still, I think that overall it's still quite doable.

David D. Stewart: So what would you say was the main lesson you learned from your research into the Dutch tax system and tax morale?

Olaf Geurts: Well, I suppose when you go one step deeper, it is of course very nice that the tax administration makes filing your tax returns very easy. But underneath, there is of course a level of requirement of government trust. Taxpayers need to trust that their money is still well spent. And despite a lot of issues and even some broader trends in Dutch society where people start to doubt politicians more often, to distrust institutions, we still see that overall, people trust that taxpayer money is still spent in the right places. Education is still good, healthcare is still good, public transportation is still good. So yeah, I think that that was something which really stood out, which all indicators point to work that that is a very solid foundation to build your tax morale on.

And that's something as well which in the Netherlands, which I conclude the article with, which was very interesting that the expert that I talked to made that connection through the very long tradition in the Netherlands of public institutions providing public services, and then specifically the so-called water councils or water authorities, which have been around for hundreds, literally hundreds of years, building levees, draining land. And I suppose for everyone in the Netherlands, that's one that's so tangible because we all realize that we live below sea level. And that's one of those things that — I actually got my tax letter from my water authority yesterday, and it really explains very clearly what they do. They provide water, they make sure nothing floods. That's just a very, very solid foundation. And then considering that that's been going on for hundreds of years, I do think that lays a solid foundation to build a certain level of government trust, which is hard to erode.

David D. Stewart: Well, Olaf, it was a fantastic article and it's a fascinating story. Thank you so much for being here.

Olaf Geurts: Thank you for having me.

David D. Stewart: Joining me now is Bárbara Mengardo, a freelance reporter who writes for Tax Notes. Bárbara, welcome to the podcast.

Bárbara Mengardo: Hi, David. Wow, thank you for having me.

David D. Stewart: Now, could you set the stage for us by telling us a bit about yourself and where you are?

Bárbara Mengardo: Oh, of course. Well, my name is Bárbara Mengardo. I was born in São Paulo, but I am currently living in Brasília, Brazil's capital. I'm a journalist with more than 15 years of experience and I am specialized in taxation and in the coverage of the judiciary, both in Brazil and Latin America. I am currently a tax editor at JOTA, which is a media outlet specialized in the covering of the three branches of power. And finally, as you already said, David, I often write as a freelancer for Tax Notes.

David D. Stewart: All right, so let's turn to the topic at hand today. So we're talking tax morale and specifically in Brazil for your case. So first start us off with: How does the tax system work there?

Bárbara Mengardo: Well, David, how many hours do I have to answer to this question? I'm joking, but well, especially if we are talking about consumption taxation, we are talking about a very complex and heavy, and sometimes unfair tax system in Brazil. But well, beginning with consumption taxation, Brazil has taxes at the federal, state, and municipal levels. And that's, in my opinion, one of the biggest problems to me in our tax system, because well, entities are often competing with each other and double taxation is pretty common. But I will give you an example, Dave. In Brazil, the municipalities, and there are more than 5,500 cities in our country, can collect taxes on services. And the states on the other hand can collect taxes on the circulation of goods.

But the problem is this line between service and goods are not always clear. So let's take a software. Is it a good? Is it a service? And so that's the kind of problem we have in our tax system. It is important to note that this scenario is about to change in Brazil because we are facing a huge tax reform. And basically the most problematic taxes will be phased out and replaced by a dual VAT and a selective tax. So supposedly from 2027, we will have a more efficient and simple and just tax system.

But well, to finish this part of consumption taxation, honestly, it is hard to say exactly how much taxpayers pay on taxes nowadays in Brazil or even how many taxes exist in Brazil. This number is probably around 90, but no one is really sure about that. And income taxation is easier to understand although we have for companies different regimes in Brazil. So basically for small companies, we have a regime called Simples, or Simple in English. And for bigger companies, we have a simplified regime and one that allows, for instance, deductions. And the last one has a 34 percent tax rate, which can reach 45 percent on financial institutions. And finally, for individuals, we have a progressive income tax rate with a maximum of 27.5 percent.

David D. Stewart: So one thing I'm interested in hearing is your experience. What is it like paying taxes for you as a Brazilian?

Bárbara Mengardo: Well, I would say confused because more than that, I would say like covering taxes, it is — I wouldn't say hard because I absolutely love this subject, but I would say there's always a new problem coming out. When you think a problem is solved, another one begins. So I would say that usually when I say to people, "I'm a journalist," people are always like, "Wow, a journalist." And then I say, "Yes, my area is taxation." And people goes like, "Oh, OK. Taxation. Wow. Specific. No?" "Yes." "Hard, no?" And I say, "Yes." No one likes taxation, but here in Brazil it's like, "Wow, this is wild." Because the system here, it's really complex. Really, really complex.

David D. Stewart: So that leads me directly to my next question. And that's about this concept of friendly collection that the Brazilian government is working on. Could you tell me about that?

Bárbara Mengardo: Well, of course. As expected, like this scenario I just showed to you generated over the years a resistance to paying taxes in Brazil. And I would say more than that, generated a profound mistrust between taxpayers and the Brazilian Tax Administration. And in order to change this scenario, the Brazilian Federal Revenue Service recently implemented three compliance programs. And the idea is basically to distinguish taxpayers according to factors like their payment history and promote what the special secretary of the Federal Revenue Service Robinson Barreirinhas called friendly collection.

David D. Stewart: So if a company finds itself in this friendly collection, what are they going to experience?

Bárbara Mengardo: In a federal level, because some states also have their own compliancy program, we have three compliance programs. So Confia, Sintonia, and OEA [the Brazilian Authorized Economic Operator Program]. I will briefly explain those programs. Starting with Confia, or "trust" in English, Confia is a program focused on large companies. So currently, only 20 companies participate in the program between big Brazilian companies or Brazilian branches of multinational. And important to say the government has plans to increase this number to 40 or even more, but nowadays just 20 companies participate in the program. But basically, through Confia, companies can work directly with the tax administration and really discuss a specific tax-related situation before they become disputes. So if they reach an agreement, great. And if there's no agreement, the tax administration of course can charge the taxpayer, but the tax administration can fine them. And that's important because fines in Brazil can reach 100 percent.

Well, the second program is called Sintonia, or "harmony" in English, and it's open to every company in Brazil regardless of size. And this program basically ranks companies from D to A+ based on their compliance and their payment history. I think this one is the most important because it's the one that it is open to everyone. And I will say more about this program in a minute, but basically high-rated companies benefit from faster reimbursement of tax credits, opportunities of self-regulation, priority service, well among others.

And finally, the last one, OEA, is focused on international trade and guarantee, for instance, prioritizing importation declaration processing and the deferral of tax payment for compliance companies. Well, those three programs were made official by a supplementary law approved by the end of 2025. So we are talking about very recent programs, and it is interesting to see how things change because of this program.

David D. Stewart: So what was the environment like that led up to this change?

Bárbara Mengardo: I would say companies are reacting well to these programs. We know that these kind of programs are common in other countries, but here in Brazil, it is really the first time that companies have this opportunity to really have a dialogue with the Federal Revenue Service. And companies seem interested in the program's benefits. There's one benefit that I didn't mention before, which is an up to 3 percent reduction in a specific tax called social contribution on net profit. And basically this reduction will be available to taxpayers who will stay compliant for three years. So it is not available now, but it will be available in the future and companies are accounting with it, so staying compliant to benefit from a tax reduction.

And when I wrote my article for Tax Notes, I interviewed some tax experts that said that even companies that were initially, I would say, reluctant to join, are now joining for fear of losing competitiveness. Basically, companies are seeing their competitors joining the program and well, they don't want to be left behind basically. And another important change that we are seeing is that we are seeing companies using the fact that they are well ranked almost as advertisement. And that's interesting. Companies are saying like, "Look, I am A+ company. I am healthy," financially speaking. So that's interesting to see. I wouldn't say that taxpayers are 100 percent trusting in the tax administration or vice versa, but the scenario definitely improved. It's a good first step, I would say.

David D. Stewart: So I understand there's been a reduction in tax benefits. Could you tell me about that and how that's working out?

Bárbara Mengardo: Well, that's a very interesting point, David, because the Brazilian tax system is also known for having multiple tax benefits. And this fact historically generated some problems. Again, in Brazil, the federal government, the state, and the municipalities can institute tax benefits and that generated a lot of problems. For instance, since we had a source-based tax system, the states use it to grant tax benefits to attract companies. So this led to what we call a fiscal war between states, because states start to give more and more and more benefits and most of them were unconstitutional. So the tax reform kind of addresses part of this problem, eliminating some tax benefits and preventing new benefits from being created. But besides that, by the end of 2025, the congress approved a supplementary law that reduced many tax benefits in 10 percent. So from this year, many tax benefits were reduced in 10 percent and besides that, the supplementary law also makes the process of approving new tax benefits more rigid. So it is an attempt we can say of the government to rebalance public accounts.

David D. Stewart: What sort of reactions are you hearing to these reductions in the tax benefits?

Bárbara Mengardo: Well, the reactions from taxpayers were not very positive, of course. There are probably thousands of lawsuits challenging these reductions in the judiciary, including three lawsuits in the Supreme Court. And we also identified at least one bill that tries to exempt some tax benefits from the reductions, but well, probably there are others. And so taxpayers are not very happy with these reductions, of course. But on the other hand, it's especially said that this reduction is positive for organizing, cleaning our system. And well, after all, tax benefits have a strong political component too. And another element that was not the main element to approve the supplementary law, but these changes also kind of align Brazil with the OECD's minimum taxation guidelines. And Brazil implemented pillar 2 rules in 2025 and the existence of so many tax benefits was seen as a possible problem in this area. So this law, this reduction kind of help in this area too.

David D. Stewart: So another point that you raise in your story is about transparency. Could you tell me about where that comes into play in Brazil?

Bárbara Mengardo: Yes. I wrote a little bit about participatory budgeting because Brazil had some experiences in that area. But it was a little sad, Dave, I would say, to see that this is not common anymore in Brazil, especially at federal and state's level. It is a little bit more common in the municipal level. There are some initiatives, but they are often related to very local, very small issues like, "Should we build this park in location A or in location B?" And sometimes, especially it's said that participatory budgeting is even used as a way to legitimize predefined agendas. So it was kind of sad to see that and also to see that although tax benefits and other aspects regarding taxation are after all public choices, there is little space to discuss taxation in budgets in general.

David D. Stewart: Well, Bárbara, I thank you so much for bringing the story to us. It's fascinating to see, especially some reforms that are so recent as they're playing out. So thank you very much for being here.

Bárbara Mengardo: Well, David, it was awesome talking to you and thank you very much for this opportunity.

David D. Stewart: That's it for this week. You can follow me online at @TaxStew, that's S-T-E-W, and be sure to follow @TaxNotes for all things tax. If you have any comments, questions, or suggestions for a future episode, you can email us at podcast@taxanalysts.org. And as always, if you like what we're doing here, please leave a rating or review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk.

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