Priority of banks and tax authorities in bankruptcies means loss of wealth
Putting banks and the Tax and Customs Administration at the front of the queue in bankruptcy cases in the Netherlands is outdated. That is the conclusion of PhD research conducted by Assistant Professor Ruben van Uden. He spoke about his research on Dutch BNR news radio station: ‘It’s no longer defensible’
For decades, when someone is declared bankrupt, banks and the tax authorities have taken priority as creditors. The ranking of creditors goes back centuries, Van Uden explains: ‘The 19th century certainly left an important mark on the current ranking.’ According to him, the high position of the tax authorities stems from this period. Banks are given priority because this ensures the availability of credit for everyone, which is important. That said, Van Uden does not think this is the most important thing: 'That priority comes at the expense of other creditors. It’s no longer defensible.'
From a legal and economic point of view, this system of priority mainly leads to a decrease in general prosperity: 'If you look at bankruptcies today, it’s clear that we don't get beyond the tax authorities. After that, the money runs out.' Changing the ranking would require a change in the law. Having completed his PhD, Van Uden remains affiliated with Leiden University. However, he does intend to get his message across in the political arena in The Hague: 'There are other options.'
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Listen to the full BNR radio item (in Dutch) (21-11-2024, from 8.19).
Image: Melinda Gimpel on Unsplash