The war on VAT fraud for a long time seems to be one from key political and economic topics at the same time. The restrictive practice of tax authorities is consistently shown as a success which reduces the VAT gap and deters any tax fraud. However, attention should be paid to the potential downside.
The National Tax Administration fights VAT fraud and honest taxpayers can be held liable by ricochet. There is no doubt that some entrepreneurs commit apparent abuse, but in addition to these, it is possible to distinguish a group of people who have been de facto punished for someone else. They were only punished for not being suspicious of the contractors.
Many officials view tax fraud as a success. This factor may promote overzealousness in the imposition of penalties.
Due diligence
There are also ‘extreme’ cases. For example, it is possible to sell fictitious invoices on behalf of a loved one who knew nothing. one of such cases, it was assessed to the detriment of the taxpayer by the tax authority and subsequently the Provincial Administrative Court. It was the NSA who, in examining the cassation complaint, ruled that an entrepreneur could not be punished for being the victim of abuse (file number. 1459/15).
The fact was so specific that the perpetrator of the forbidden act issued empty invoices to which he gave credibility by using his brother's stamp. Upon his release, he testified that he was acting on his own. However, the tax authority charged the entrepreneur for lack of due diligence. He felt he should protect the stamp from persons third and placed him responsible for a forbidden act he did not know of. The position of the body was accepted by the WSA. The NSA issued a ruling in a completely different tone:
„If, as a result of the unlawful action of another person, an issuer (seller, service provider) has been designated in the invoice as an issuer (seller) by an entity which has not seen its issue, has not accepted its issue and which has not actually issued or ordered it to be issued, and has not placed it on the legal market, that entity may not be regarded as an issuer of the invoice within the meaning of Article 108(1) u.p.t.u.... These circumstances should be examined individually, on the basis of each particular case.’
Accidental victims
The NSA stressed in the passage cited that each case should be assessed individually. However, we must take into account that many officials view tax fraud as a success. This factor may promote overzealousness in the imposition of penalties.
However, the entrepreneur decided to fight to the end, despite the fact that the court first the instance was divided by the adverse position of the body. His labor was not in vain. NSA ruled:
„Interpretation (...) adopted by the Court of First Instance first the instance and the Director of the IS is also unacceptable because it may lead to an obligation to pay the tax shown in the invoice to an entity which had nothing to do with the issue of that invoice.’
This case shows that assigning responsibility for tax fraud to someone can be very hasty and unfair. The fight against VAT fraud may collect accidental victims. The optimistic conclusion is that an unfair decision by the tax authority may be repealed.
Author:
Expert Russell Bedford.