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Barking About Taxes

2 min readBy: Gerald Prante

A funny story about the Netherland’s dog taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. and the problems of enforcing the tax comes to us from Yahoo News (AP):

The Bruintjes family says a city inspector was barking up the wrong tree when he handed them an euro80 (US$97) bill for the Dutch dog tax.

The family insists it does not have a dog — only a barking doorbell.

It was the second year in a row the family had a run-in with authorities over their doorbell, which plays 15 different barking noises, Dutch media reported Thursday.

“Last year it was a huge effort to convince the inspector that we didn’t have a dog, and now it’s happened again,” Gerrit Bruintjes was quoted as saying by RTL Nieuws.

In the Netherlands, dog owners are required to pay the “hondenbelasting,” an infamous annual tax that is frequently evaded.

After pressing the doorbell and hearing the barks, the inspector in the city of Oldenzaal simply pushed a bill through the family’s mail slot. (Full Story)

Some might argue that a dog tax holds up to the “benefit principle” of taxation if revenue goes to provide services like dog catching or somehow deters the negative externalityAn externality, in economics terms, is a side effect or consequence of an activity that is not reflected in the cost of that activity, and not primarily borne by those directly involved in said activity. Externalities can be caused by either production or consumption of a good or service and can be positive or negative. of dog waste and possible danger. But dogs also may generate positive externalities—protection of a house, or a more vital dog population providing police with a better choice of canines.

Regardless of how close the dog tax comes to the ideal of the benefit principle, enforcement is an obvious problem, as demonstrated in the article. But many taxes imposed in the United States also have similar problems. For example, many states impose excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. es on illicit substances like marijuana, requiring drug dealers to stamp illegal substances with proof of taxes paid. Needless to say, compliance rates aren’t high.

Even portions of the federal income tax code have similar enforcement problems. For example, the code relies heavily on voluntary compliance in areas like charitable contributions—which experience has shown to have myriad compliance problems due to a lack of effective oversight.