Childcare benefits scandal: Dutch government to pay million Euro fine over racist data discrimination

Due to massive violations of the General Data Protection Regulation, the Dutch government has to pay a fine of 2.75 million euros. As part of the so-called Toeslagenaffaire (dutch for childcare benefit affair), the tax authority used information about people’s nationality in a discriminatory and unlawful manner for years, the national data protection authority announced in December. The government has since acknowledged the mistakes.

The fine is the regulator’s response to a scandal that continues to deeply shake the Netherlands. In the 2010s, the national tax authority Belastingdienst falsely demanded childcare benefit refunds from tens of thousands of parents. Even minor formal errors in filling out forms led to horrendous claims, and a supposedly incorrect nationality could lead to stigmatizing fraud investigations for years. Many families dependent on state support were unjustly driven to financial ruin as a result.

The authority’s actions were proven to be racist. As the data protection authority points out in its press release, the Belastingdienst used data on the nationality of childcare benefit applicants as an indicator for various purposes. For example, the information on whether someone has dual citizenship was used in the decision if support was granted, although the tax authority should have deleted this data on more than 1.4 million people long ago.

Information on the citizenship of those affected had also been used as a marker for suspicion in detecting and combating fraud in the childcare benefit system. In an automated system for risk assessment of applicants, non-Dutch nationality was considered a risk factor. Anyone who had a nationality that was not exclusively Dutch was per se considered suspect to the tax authorities.

Victims had to fight for recognition

„Members of the public don’t have a choice; they are forced to allow the government to process their personal data“, Dutch Data Protection Commissioner Aleid Wolfsen said in a statement. Therefore, he said, it is imperative that everyone can have absolute confidence that this processing is taking place in a reasonable manner. „That the government doesn’t keep and process unnecessary data about individuals. And that there is never any element of discrimination involved in an individual’s contact with the government”, Wolfsen added.

A spokeswoman for the Ministry of Finance confirmed that her office accepted the fine and had initiated measures to stop the discriminatory data processing. Among other things, she said, the Belastingdienst had deleted the database containing information on dual citizenship.

The Dutch government had only admitted its wrongdoing after numerous cover-up attempts. Victims of the scandal spent years fighting for recognition and for the scandal to be cleared up. They have since been promised repayment of funds and compensation of 30,000 euros each.

After a parliamentary investigative committee found systematic discrimination and massive injustice at the end of 2020, the entire cabinet under Prime Minister Mark Rutte resigned at the beginning of 2021. However, the scandal apparently did not do any lasting damage to the long-term Prime Minister: In the March elections, Rutte’s right-wing liberal party VVD once again became the strongest force. It was not until December that it agreed with the three other governing parties to continue its coalition under Rutte’s leadership.

Data discrimination: „When it goes wrong, it really goes wrong“

Cases of administrations using sensitive data to automatically evaluate citizens and making massive errors have repeatedly caused a stir in the past years. In Australia an algorithm incorrectly sent demands for repayments to recipients of government funds, plunging hundreds of thousands of people into crisis. In Europe, Austria has been arguing for years about a system that is supposed to predict job seekers‘ chances on the job market, systematically disadvantaging women and the elderly.

The fine in the Netherlands is probably the first case in which a government has to pay a penalty for data-based discrimination against citizens. Data Protection Commissioner Aleid Wolfsen therefore emphasizes the fundamental importance of the case. „In a world in which digitalisation is advancing rapidly, it’s becoming all the more crucial to protect individuals’ personal data in order to protect other fundamental rights, such as the rights to safety, property and health.“

The case exemplifies why this is so important, he said. „Unlawful processing by means of an algorithm led to a violation of the right to equality and non-discrimination.“ Digital applications, Wolfsen continued, have become irreplaceable and make it possible to process and combine large amounts of information in a practical way. „When it goes wrong, it really goes wrong.“