Tax authorities are not entitled to make apparent use of the regulation which allows for suspension of the limitation period or for its non-initiation in the case of commencement of penal fiscal proceedings (art. 70 § 6 item 1 of the Tax Ordinance Act). Additionally, a taxpayer must be notified of this fact and the suspicion of a crime or offence must result from his failure to fulfil a tax liability. Unfortunately, in practice, there is a frequent abuse of the law by the tax authorities, consisting in the initiation of penal fiscal proceedings in the case of a tax offence only for the appearance’s sake, to extend the time for completion of tax proceedings.
Inconsistent standpoint of administrative courts
According to the jurisprudence of the administrative courts, there is no doubt that the ostensible commencement of penal fiscal proceedings by the tax authorities in order to stop the running of the limitation period cannot be approved, as it constitutes an abuse of law. However, the divergence in the approach of the administrative courts does not specify whether statutory provisions allow the court to examine the legitimacy of the initiation of penal fiscal proceedings by a tax authority. An example is the judgment of the Supreme Administrative Court (further: NSA) of 30 July 2020 (case ref. no. I FSK 42 /20), according to which, administrative courts may control whether there has been apparent use of the provisions of the Tax Ordinance by tax authorities, especially in the context of a possible breach of the principle of trust in tax authorities.
In turn, according to a different view prevailing in the doctrine, presented e.g. in the judgment of 9 November 2018 (ref. I FSK 2149/16), the regulations do not allow the court to assess the legitimacy of initiating penal fiscal proceedings. According to Judge Sylwester Marciniak, an administrative court would thus enter the competences of a criminal court (judgment of the NSA of 30 July 2020, ref. no. I FSK 42/20).
Resolution of 7 judges of NSA clarifying the position of courts
In order to dispel doubts, the Ombudsman for Small and Medium-Sized Enterprises requested the NSA to adopt a resolution aimed at clarifying legal provisions, the application of which has caused discrepancies in the case law of administrative courts.
In response to the above, on 24 May 2021, a resolution was issued (case ref. no. I FPS 1/21), in which a panel of 7 judges ruled that administrative courts have the right to control the legitimacy of commencement of penal fiscal proceedings by tax authorities. If administrative courts did not have such a right, the limitation period would be purely illusory. Moreover, the resolution stipulates the court, when examining the legality of administrative action, also enters into other branches of law, e.g. civil law, labour law.
At the same time, administrative courts do not examine either the timing or the legitimacy of the initiation of penal fiscal proceedings from the point of view of a penal fiscal case. It is necessary to assess whether the tax authority has not made an apparent use of the provisions in order to extend the limitation period. Such a suspicion arises when proceedings are initiated in the absence of material or subject premises or when negative procedural prerequisites exist. Additional doubts as to the purpose of commencement of penal fiscal proceedings by tax authorities may be raised by issuance of a decision just before the expiry of the limitation period or inactivity of the authority after issuance of the decision.
Consequences for taxpayers
There is no doubt that the aforementioned NSA resolution is favourable for taxpayers. The judges rejected the position according to which an administrative court has no right at all to control tax authorities in the course of initiating penal fiscal proceedings.
Obviously, the most advantageous solution from the point of view of taxpayers would be removal of Article 70 § 6 point 1 from the Tax Ordinance, which does not seem possible. The resolution is also important for the practice of tax authorities, which should:
- ensure that the taxpayer is notified as soon as possible of the suspension or non- starting of the limitation period;
- indicate the connection between the suspicion of an offence and failure to fulfill tax obligations;
- adduce – in the order – the premises that justify the initiation of penal fiscal proceedings.
Certainly, the above resolution of the NSA will not completely solve the problem of abuse of the law by tax authorities. One can only hope, however, that it will motivate the tax administration authorities to more scrupulously indicate to the taxpayer the prerequisites for initiating penal fiscal proceedings against him.
Maciej Kozub, VAT specialist, Poznań