As Reich Commissioner for the Occupied Netherlands, Seyss-Inquart was ruthless in applying terrorism to suppress all opposition to the German occupation, a program which he described as "annihilating" his opponents. In collaboration with the local Higher SS and Police Leaders he was involved in the shooting of hostages for offenses against the occupation authorities and sending to concentration camps all suspected opponents of occupation policies including priests and educators. Many of the Dutch police were forced to participate in those programs by threats of reprisal against their families. Dutch courts were also forced to participate in this program, but when they indicated their reluctance to give sentences of imprisonment because so many prisoners were in fact killed, a greater emphasis was placed on the use of summary police courts.

Seyss-Inquart carried out the economic administration of the Netherlands without regard for rules of the Hague Convention' which he described as obsolete. Instead, a policy was adopted for the maximum utilization of economic potential of the Netherlands, and executed with small regard for its effect on the inhabitants. There was widespread pillage of public and private property which was given color of legality by Seyss-Inquart's regulations, and assisted by manipulations of the financial institutions of the Netherlands under his control.

As Reich Commissioner for the Netherlands, Seyss-Inquart immediately began sending forced laborers to Germany. Until 1942 labor service in Germany was theoretically voluntary, but was actually coerced by strong economic and governmental pressure. In 1942 Seyss-Inquart formally decreed compulsory labor service, and utilized the services of the Security Police and SD to prevent evasion of his order. During the occupation over 500,000 people were sent from the Netherlands to the Reich as laborers and only a very small proportion were actually volunteers.
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One of Seyss-Inquart's first steps as Reich Commissioner of the Netherlands was to put into effect a series of laws imposing economic discriminations against the Jews. This was followed by decrees requiring their registration, decrees compelling them to reside in ghettos and to wear the Star of David, sporadic arrests and detention in concentration camps, and finally, at the suggestion of Heydrich, the mass deportation of almost 120,000 of Holland's 140 000 Jews to Auschwitz and the "final solution". Seyss-Inquart admits knowing that they were going to Auschwitz, but claims that he heard from people who had been to Auschwitz that the Jews were comparatively well off there, and that he thought that they were being held there for resettlement after the war. In light of the evidence and on account of his official position it is impossible to believe this claim.