The Chief Administrative Court’s hearing included cases concerning the controversial and unfavourable practice of tax authorities for taxpayers. For years, tax authorities have been initiating criminal proceedings against taxpayers in order to bring about a suspension of the limitation period. This practice of tax authorities has repeatedly met with criticism of practitioners defending the interests of their clients – tax advisers, lawyers, legal advisers.
In issued 30 July 2020 judgments (I FSK) 128/20 and I FSK 42/20 The NSA has confirmed that the administrative court is entitled to examine whether the tax authority is duly citing the suspension of the limitation period by initiating tax criminal proceedings. The NSA's position thus formulated is beneficial for taxpayers and gives hope that in the future the criminal proceedings which have been unfairly and instrumentally initiated by the authorities will be decommissioned and, more importantly, will not have the effect of suspending the limitation period.
In his oral justification, the NSA explained that tax authorities were not entitled to free, nothing unlimited, criminal proceedings only to suspend the limitation of tax obligations
In his oral justification, the NSA explained that tax authorities were not entitled to open proceedings free of charge only to suspend the limitation of tax obligations. Any initiation of a criminal tax investigation shall be subject to substantive in-house and judicial review.
The practice of tax authorities, which has beneficial effects on the tax apparatus (in the form of interruptions of the limitation period) and at the same time adverse effects on the taxpayer, is not allowed.
All the more so, since the tax proceedings were initiated just before the expiry of the statutory limitation period and no action was subsequently taken in the criminal proceedings initiated. The taxpayer was only informed of the suspension of the limitation period for his obligation.
Many taxpayers are familiar with this pattern of action.
Such action by the tax authorities gives rise to the assumption that the tax investigation was initiated only for the sake of appearance, only in order to suspend the limitation period and that the authority had more time to settle the matter in substance. The conduct of tax authorities should be assessed as an abuse of law. In a democratic legal state, there is no reason to use the possibility for tax authorities to suspend the limitation period as a result of the initiation of tax criminal proceedings.
As the NSA stressed, the court should counter the abuse of the law, especially when abuse is committed by an authority. It should be remembered that taxpayers have certain rights which are protected and courts should act in such a way as to prevent the apparatus from breaking the rights of taxpayers. Therefore, according to the NSA, administrative courts have the power to examine whether the limitation period has been suspended as a result of the initiation of a criminal-carb procedure.
The NSA confirmed by its ruling that despite the fulfilment of the conditions from Article 70 section 6 point 1 Tax Ordinance i.e. In spite of the formal initiation of tax criminal proceedings and the correct notification of this fact to the taxpayer, this did not result in a suspension of the limitation period. We hope that this position of the administrative courts will continue, and tax authorities will stop being reprehensible and unfavourable to taxpayers.