Sand pits and penalties (Column Trends 1/9/2022)
Many children may have experienced it again during the past holidays: digging a deep well on the beach is more difficult than expected. The best way to go about it is to dig a wide well. This also applies to intellectual subjects, even to legal and tax matters. In my first years as a lawyer, my mentor Victor Dauginet encouraged me to give free rein to my legal curiosity and to broaden my experience. Much more than the average tax lawyer, I made forays outside the specialist discipline of tax law. Since we got to handle a good commercial case from time to time, it also meant that I often had to deal with the summary proceedings court.
The concept of ‘summary proceedings’ also implies ‘compulsory execution’ and ‘compulsory payments’. More than two decades later, these exercises have yielded a wealth of relevant experience.
Even before its summer recess, which starts in July, Belgium’s Council of Ministers adopted a preliminary draft law to make far-reaching adjustments to the tax procedure. The crux of this bill is that the tax authorities can from now on impose a penalty on an unwilling taxpayer in order to force him or her to cooperate in a tax audit. Needless to say that this is a cause for concern. Can a taxpayer actually be compelled? And if so, in which circumstances? This will have to be tested against European case law on the prohibition of self-incrimination.
In addition, there is a very unexpected side
to the new law. A judicial review of what the tax authorities are allowed – and especially not allowed – to do may now go against the tax audit. It often interprets the audit as a search by the tax authorities. All too often the taxpayer has to endure it passively and can only defend him/herself post factum. Now, things may be different. If the taxpayer does not spontaneously cooperate with the search, the law prescribes that the tax authorities will force this cooperation by imposing a penalty.
The tax authorities will have to obtain this injunction from a summary proceedings court. This is a total paradigm shift. Until now, it has been the taxpayer who has had to take the initiative to turn to the courts.
The legislator may also not have taken into account the fact that the taxpayer must be involved in that procedure. The tax authorities will not simply be able to go to court behind the taxpayer’s back to quickly obtain an injunction to impose a penalty. Unilateral petitions are allowed in our legal system, but are the absolute exception. And that exception cannot be applied if there is an open and pre-existing dispute about the application of the law.
And luckily, penalties cannot be imposed just like that, or for generalities. No, these must be very clearly defined actions. Incidentally, a judge in summary proceedings will also have to check whether the act for which a penalty is imposed has a correct factual and legal basis. The tax authorities will have to justify before that judge which action they want to enforce. The taxpayer will be able to submit his or her remarks before the tax authorities can carry out the investigative actions.
All too often the taxpayer has to endure a tax audit passively and can only defend him/herself post factum. Now, things may be different.
Let’s take an example: if the tax authorities want to copy data, the administration will have to indicate which information it concerns and where it believes it can be found. The taxpayer will therefore be able to immediately request legal guarantees. In all likelihood, the first lawsuits will be about purging confidential information and installing safeguards with regard to processing the data. Not everything is what it seems. And certainly not with this bill. Put into effect as a scourge for the taxpayer, it will often turn out to be a blessing in practice
Published under
- Corporate