Rule in dubio pro tributario

Constitutional rules are standards that should be taken into account in the application of tax law, and therefore there is no need for them to be repeated in the general rules of this kind of law.

Most representatives of the doctrine share the view that the principle of settling doubts in favour of the taxpayer (in dubio pro tributario) is a quasi-logical consequence of constitutional principles: 1) a democratic rule of law (Article 2 Constitution of the Republic of Poland), 2) statutory tax regulation (Article 84 Constitution of the Republic of Poland), 3) economic freedom and property protection.

It also points to general principles of tax proceedings, such as objective truth, enhancing citizens' confidence in the state authorities or actively participating in the proceedings.

1. In dubio pro tributario as a constitutional principle

Accordingly, the principle of dispute settlement in favour of the taxpayer should apply to proceedings conducted by the authorities 1 .

This principle is to be primarily a guarantee that the taxable person pays the correct amount of tax, as it requires that any doubt be settled in its favour in the collection process and then the assessment of evidence. This ensures legal certainty.

In dubio pro tributario therefore follows constitutional principles that the taxpayer is obliged to pay no more than required by tax law. Everyone is obliged to bear public burdens, including taxes, only in so far as this is due to the law (Article 84 Constitution of the Republic of Poland).

However, the principle in dubio pro tributario was often violated by tax authorities in the application of the law and ignored in the case law of the administrative courts, and it was therefore proposed that it should be introduced into tax law 2 .

2. The principle in dubio pro tributario established in Tax Ordinance 3

On 1 January 2016 entered into force the Act of 5 August 2015 on amending the Act - Tax Ordinance and some other laws 4 , adding Article 2a to the General Court, according to which doubts about the content of the tax legislation cannot be removed, are settled in favour of the taxpayer.

Its introduction was part of the presidential election campaign, not the result of work on correct regulation, which is why the rule immediately sparked great controversy. Doubts about the inept rule tried to settle the Minister of Finance, who 29 December 2015 issued a general interpretation on the application Article 2a o.p. 5 .

The Ministry clarified that the principle of settling doubts in favour of the taxpayer concerns only doubts as to the content of the law and not doubts about the facts. However, the content of that standard does not suggest that the opposite standard applies to the removal of doubts about the facts.

The proper application of the provisions relating to tax proceedings and, in particular, the rules regulating the taking of evidence should ensure that the examination of the facts which leads to the determination of the facts in the case and which are not.

This is so important that constitutional standards also provide for the obligation to settle factual doubts in favour of the taxpayer.

The tax authority that settles the tax case in which it adopts the specific meaning of the law applicable in the case is the direct addressee of the standard resulting from Article 2a In the general interpretation, the Minister of Finance also points to a taxable person who can rely on that provision and demand its application by the tax authority in cases where, in his view, there were inconceivable interpretation doubts and the tax authority did not apply Article 2a In addition, there are no legitimate reasons to prevent the application of this provision also in the cases of other entities charged with obligations arising from tax law – payers, collectors, successors of the taxpayer or persons third responsible for other people's tax obligations.

Another question concerned the application of the principle only to tax proceedings. The interpretation shows that from the location itself Article 2a in general provisions, it results in a broader application, and therefore the settlement of cases by tax authorities is carried out by way of the rulings.

This also applies to the interpretation of tax law. Therefore, the disputed application issues Article 2a These administrative acts should be the subject of an o.p. or an indication of the absence of conditions for its application.

The unfortunate phrase "the benefit of the taxpayer" may also raise considerable doubts in practice. Therefore, the taxpayer should indicate the most optimal interpretation to which the tax authority is required to respond.

In particular, the explanatory memorandum must indicate whether the provision raises doubts and, if so, how it resolved it. The absence of reference to the taxpayer's argument will constitute an arbitrary appeal, as will the failure to resolve doubts in favour of the taxpayer.

If the authority infringes the above rules, this will be the basis for the administrative court's annulment. Importantly, the Minister of Finance himself indicated that if more than one, an equivalent and beneficial interpretation of the provision for the taxpayer, the authority should choose it.

If the authority is unable to determine this, it should obtain the taxpayer's position as to the choice of the most favourable interpretation for it. It is situations where both interpretations are beneficial but in another field of action of tax law. Selection one will result in loss of benefits from second.

3. Role of principle in dubio pro tributario in the interpretation process

In principle, in dubio pro tributario should be addressed only if, as a result of the interpretation, the meaning of the decoded legal standard cannot be clearly established. It must be pointed out that it has legal doubts, two basic tasks:

1. prohibits the issuing of decisions contrary to the results of a correctly interpreted interpretation of tax legislation (no search for any meaning other than those resulting from the linguistic context if this would lead to adverse results for the taxpayer);
2. where the results of a linguistic interpretation are ambiguous, it obliges those exercising the right to take the decision which is most favourable to the taxpayer and thereby prevents the search for such an interpretation which would be detrimental to the taxpayer (order to adopt results which are more favourable to the taxpayer and therefore to prohibit the search for such an interpretation which would be detrimental to the taxpayer).

Where a linguistic interpretation allows the meaning of a provision of tax law to be determined, this rule limits only the interpreter's temptation to reach for other types of interpretation, in particular a selective interpretation, the results of which could lead to adverse results for the taxpayer.

It is a kind of restriction, not just an interpretative directive requiring choice one of the types of interpretation. Linguistic interpretation is not only the starting point of the interpretation of the law – it also outlines its limits.

If the linguistic context is unambiguous, there is no need to seek other types of interpretation and it is not necessary to decide on the basis of the Interpretation Directive second the extent to which the indubio protributario principle can be considered.

The body that interprets must therefore not ignore the literal interpretation and apply that interpretative directive, even if this would lead to more favourable interpretative results. This directive must neither improve the situation of the taxable person contrary to the explicit rule of law nor shape the scope of the tax obligation.

This would distort the objectives and functions of tax law. It can only limit the scope of the interference of tax standards, especially when it is problematic to determine the possible meaning of those standards, namely the Interpretation Directive first the degree leads to dubious results.

4. Role of principle in dubio pro tributario in tax proceedings

The principle in dubio pro tributario is not an essential determinant leading to the establishment of objective truth. Such obligations to tax authorities arise from other tax rules – both from the general rules of procedure and from many special provisions. This principle is a guide to the implementation of the guarantee rules. In particular, this concerns the principles of objective truth and the free assessment of evidence.

There is no doubt that the obligation to establish any factual circumstances relevant to the outcome of the case is solely the responsibility of the tax authority (Article 122 o.p.). If, therefore, the tax authority does not carry out a complete inquiry, it is unacceptable to produce negative consequences for the taxpayer, since in such a case no factual facts relevant to the case have been proved.

Thus, the tax authorities are obliged to establish objective truth, as only a well established fact allows a ruling to be given. Importantly, the authority cannot transfer this obligation to the party, and should even seek to clarify the facts of the case without considering the party's attitude. The tax authority is obliged to collect evidence both of its own motion and at the request of the party.

The obligation to establish objective truth does not mean direct application of the principle in dubio pro tributario. However, any gaps in evidence arising from a breach of obligations on the tax authority cannot be interpreted to the detriment of the taxpayer.

In this sense, this principle requires the authorities to collect complete evidence, the shortcomings of which cannot be settled against the taxpayer.

It is a complement to the principle of objective truth as it prejudges that a breach of the obligation of the tax authority to establish the full facts must not lead to negative consequences for the taxpayer.

The principle of in dubio pro tributario will apply only if the tax authority carries out a tax proceeding in accordance with the rules laid down in the General Tax Code and as a result the relevant circumstances are not resolved. In such a situation, all existing doubts must be settled in favour of the taxpayer.

When a Party Is Possible two equivalent versions of events, a more favourable version for the taxpayer should be chosen.

Moreover, the in dubio pro tributario principle is relevant in the assessment of evidence, where it outlines the limits of the free assessment of evidence. It does not allow any assessment of evidence to the detriment of the taxpayer.

It is not permissible to issue a negative decision on the basis of selected evidence which is not favourable to the taxpayer.

It is only if the tax authority demonstrates on the basis of all the evidence which it considers to be reliable and which it has deprived of such assets and duly justified that such an assessment can be considered to have been made in the context of the free assessment of the evidence.

This is of particular importance in tax proceedings characterised by inquisition.

The tax authority must therefore demonstrate beyond doubt that it has overturned two presumptions of fact:

• 1) presumption of conformity of the facts with the taxpayer’s claims,
• 2) Presumption of the correctness of the factual conclusion of the relevant standard of tax law resulting from the presumption of the regularity of the tax settlement 6 .

Therefore, the in dubio pro tributario principle in relation to facts is intended to increase the requirements that should be met in order for a given circumstance to be considered as proven by the tax authorities.

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1 Wider: A. Marianski, Settlement of Doubt in the Advantage of the taxpayer. Tax Law, Warsaw 2011.

2 A. Mariański, Rule in dubio pro tributario in the case law of the NSA and the Constitutional Court, [in:] Z. Posinski (ed.), XXV years of changes in financial law and tax law – evaluation of achievements and conclusions for the future, Szczecin 2014, p. 501-508.

3 Act of 29 August 1997 - Tax Ordinance, i.e. Journal of Laws of 2019, item 900; hereinafter referred to as O.P.

4 Journal of Laws of 2015, item 1197.

5 reference no. PK4.8022.44.2015, Legalis.

6 Article 21(3) o.p.