The tax administration has a "preventive" tool, namely a safeguard decision. This seemingly neutral term may mean the taxpayer to be punished for violating a law that has never been committed.
The safeguard decision may be issued in the course of a tax procedure or during a tax audit. In practice, it may appear that tax controllers will see minor irregularities and will therefore use this tool as a ‘just in case’. The reasons for such decisions can be formulated in a very general way.
Businesses' difficulties with tax authorities are often due to the fact that the tax office detects irregularities and imposes a financial penalty, which sometimes ruins business and deprives financial liquidity. According to Article 33.
Tax Ordinance the controller shall also have the right to safeguard the assets of the taxpayer if there is a legitimate concern that the tax liability will not be fulfilled. However, the provision is very general. The field of abuse by officials is enormous in this regard. Can this be effectively defended?
Detail matters
According to the provision, a property security may be used ‘in particular where the taxable person has not permanently paid due public liabilities or is engaged in activities involving the disposal of assets’. It seems to be clear, but the whole can be complicated due to the wording "in particular". This detail makes it possible to take possession of assets subjectively convince an official that there have been any irregularities on the part of the taxpayer.
The safeguard decision may be issued in the course of a tax procedure or during a tax audit. In practice, it may appear that tax controllers will see minor irregularities and will therefore use this tool as a ‘just in case’. The reasons for such decisions can be formulated in a very general way.
Overzealous and liquidity risk
The wording of the provision indicates that a standard safeguard decision is only issued if the taxpayer persists in evading accounts with a tax or deliberately sells the property in order to prevent the performance of the claim. Other circumstances may be the basis of the safeguard decision only exceptionally.
So much for theory. However, the overzealousness of the tax authority may result in a significant part of the business account being frozen and a loss of liquidity. However, the addressee of such a decision is not deprived of his defence.
The safety decision can be appealed. It should then be argued that there is no reasonable concern that the tax liability will not be fulfilled. The lack of response from a “punished” entrepreneur may even encourage the tax authority to further repressive steps due to the creation of an impression of acceptance and “accusation”. The adverse settlement of the tax authority on this issue does not necessarily imply a loss.