NETHERLANDS - The Dutch Internal Revenue Service has ordered 600 real estate companies to pay €330m in fees and back taxes after conducting a large-scale investigation of the industry.
Under-secretary of Finance Frans Weekers said: "I have ordered the Internal Revenue Service to continue to scrutinise the real estate industry. We will not allow any abuse."
News of the multi-million euro fines was announced at the opening of the annual property investor conference in Amsterdam, organised by IPE.com's sister publication IP Real Estate, where some 240 institutional property investors from 18 countries are gathered today.
During his opening address, Martin Hurst, editor of IP Real Estate, said: "The Dutch IRS has found evidence of fraud or fiscal irregularities in half of the companies investigated throughout the property investment chain. Information at this point is sketchy, but this is clearly shocking news to the industry."
Hurst pointed out that institutional property investors still operated in "an extremely difficult environment" and that news of the widespread fraud was a blow to the industry.
"The Dutch IRS is planning follow-up investigations, collaborating with pension funds and related organisations," he said.
The Internal Revenue Service investigated 1,291 companies during an investigation dubbed 'Operation Nokvorst', finding fiscal irregularities at half of them.
The ministry said: "For instance, companies attempted to keep revenue off the books by using middlemen and through other structures. The IRS investigations uncovered a total of €1bn that companies failed to report."
In addition to back taxes and fines, criminal procedures have been started in eight cases, including the notorious property fraud involving former directors at Philips pension fund and Rabo Bouwfonds.
The investigation has made it clear that the real estate industry's transparency leaves much to be desired, the IRS said.
"For one thing, frequently suspicious ABC structures are being used, employing middlemen to try and hide transactions worth millions from the IRS," it said.
Based on the results of the investigation, the IRS will focus on "key people" at real estate organisations to uncover suspicious ABC transactions, fraudulent invoices and "shady foreign financing".
In addition, transactions between parties that are in any way related will be "watched closely", the Ministry said, adding that the Internal Revenue Service intended to work with institutional investors, including pension funds, to bring "more integrity" to the property chain.