Ioannis Psarakis, Lecturer, LL.M (III), PhD Cand.
(Republished from Euro2Day)
Summary: The purpose of this note is to provide a clear presentation of the purposes of the Dispute Resolution Division and the opportunities that arise for the taxpayer. This could not be done better than by reference to the actual practice of the DSD to date.
By settling a tax dispute already at the administrative level, the benefits are manifold. It is therefore in the taxpayer's interest to make the best possible use of this - mandatory, after all - precursor. At the same time, however, we must draw attention to the - clearly real - risk that any (already) inadequate handling at this stage may in future become a painful burden for the development of the case at the judicial stage.
Recourse to the courts - including in tax disputes - is not inexpensive. This is clearly true for the claimant, but it is also true for the State itself: in the sense that resources and fully qualified staff (judges, etc.) will be devoted to each case, individually. In cases where the initiation of such a procedure can be avoided, it is beneficial, for all concerned, to avoid it.
To a large extent, this purpose is served by the Dispute Resolution Division (DRD) as currently regulated by the a. 63 of Law No. 4174/2014 (Code of Tax Procedure - TDP). According to this, "the liable party, if he contests any act issued against him by the Tax Administration or in case of implicit refusal, must file a legal appeal requesting the review of the act in the context of an administrative procedure by the Internal Review Service of the Tax Administration".
From the wording of the Act that "if he challenges any act issued against him by the Tax Administration or in case of implied refusal", the impression should not be created that any act which originates from the tax authority is challenged by way of an interlocutory appeal. Indeed, there will be acts which, although originating from the competent tax authority, will be found inadmissible to be challenged in an appeal and therefore such a (wrong) action will only burden the case with additional work (and costs).
A typical example - and a frequent case encountered in the study of BCC decisions - is an appeal against acts which, however, do not arise at the stage of determining the economic burden (e.g. an act of tax or fine assessment) but, for example, at the stage of administrative enforcement. Responses (or implicit refusals) by the tax authorities to requests, e.g. for the cancellation of debts, are also not challenged in an appeal, for the same reason. But even in cases where the tax is first determined, the appeal may be inadmissible: as held in a recent decision of the Athens Tax Court, in cases of direct tax determination (i.e. when the tax determination arises without further action, simultaneously with the submission of the tax return), it is not an act which is challenged under Art. 63 of the Tax Code by means of an appeal.
In all other respects, the filing of an appeal - for those acts for which such an appeal is provided - is laid down by law as a necessary precondition for the subsequent challenge of the act before the Court. In such cases, a direct challenge to the act before the Court will be dismissed as inadmissible (the exceptions are really very few and mentioning them will confuse rather than assist the reader in forming the 'big picture' on the issue).
Indeed, if we want to be precise, it is the decision of the Board of Appeal (which rejected - in whole or in part - the appeal against the original act) that will be challenged before the Court of Justice. Failure to reply within 120 days is also considered as such (i.e. rejection). It is therefore necessary for the BPA to challenge a 'decision', which (i.e. a decision) will then - and to the extent that it is unsatisfactory - be challenged in court.
But even if the appeal is not upheld in its entirety - and thus the case is not closed at the administrative level - the procedure before the BCC retains another usefulness: it is a 'pre-control' stage for all those cases that are to be brought before the courts. With the reasoning of the CFI, which will henceforth accompany the case, the case will have undergone a preliminary assessment which will highlight the main issues. This will speed up the administrative proceedings and the taxpayer - if vindication at the judicial level is imminent - will achieve it much sooner. It is also common for the BTI to refer the matter to the competent tax authority for further evidence and so on. Therefore, in any case, the case is more 'mature' before the Administrative Court.
For these reasons (to resolve disputes at the administrative level and in any case to speed up the administrative proceedings if they are brought before it), the law establishes an appeal before the BCC as a necessary first step in the judicial challenge to the act.
Do I have a chance before the BPA?
The numbers are probably the best answer: the average number of BCC decisions for 2018 and 2019 that uphold taxpayers' appeals is 40%. In other words, in about half of the cases, these will be closed at the administrative stage and there will be no need to appeal to the Administrative Courts with all that this implies.
However, to be honest, the above-mentioned percentage (40%) corresponds to appeals that have been dealt with. It should be recalled at this point that if no decision is taken on an appeal within 120 days of the lodging of the appeal, it is presumed that the decision on the appeal is rejected (which "rejection" can then be challenged before the Administrative Courts). We are therefore not talking about 40% of all appeals, but about 40% of appeals on which the BTI has given an explicit answer (acceptance/partial acceptance/rejection).
This fact, however, does not significantly alter the conclusion that the chances of being vindicated in the context of an appeal before the BTI are high. This is because for the years 2017-2019 the average implied rejection rate was only 8%. Therefore, few appeals were, in the end, not considered by the Agency. Moreover, the trend observed in recent years is that the BPA tries to explicitly rule on appeals that are filed. It is indicative that just a few years ago (for the years 2014-2015) the average implicit rejection rate was 44%.
Among the cases that the BCC has been called upon to examine, subsequently granting the taxpayer's request, we identify first of all those in which the positive judgment is foreseeable, because, for example, the tax authority ruled contrary to established jurisprudence of the Administrative Courts or the audit committed a manifest error (for example, in the procedure for the seizure of books and records). In fact, following "by profession" a large number of tax cases, there are many times when the BTI draws the attention of the competent bodies to recurring issues that are susceptible to horizontal treatment, already by the Financial Services, through the issuance of circulars.
However, there are also cases in which the taxpayer is (already) vindicated before the BPA, without it being a "glaring" case of negligence or omission on the part of the tax authority. In these cases, the less 'obvious' ones, it is necessary to precede the approach, the appropriate case law and the general legal substantiation of the taxpayer's position by means of an appeal. This is because, in each case, the BTI is based on case-law developed up to that time, in conjunction with the provisions in force and the circulars of the tax authority. The BAT rarely 'innovates'.
Thus, practice shows us that complex issues of property appreciation have indeed been resolved in favour of the taxpayer at the level of the BAT (e.g. deposits/transfers to an individual account, issues of a joint account where it was however found that the deposits concerned the non-controlled person), cases of fictitious invoices (based mainly on the good faith of the recipient but also on an inadequate justification of the audit report), stamp duty issues (e.g. on loans and cash facilities from and to shareholders of the A. e.g. on the basis of disputes on the basis of disputed judgements of the audit which "threw out the books" or even failed to produce them and proceeded to an off-balance sheet determination, cases of disputed comparative data for the determination of real estate transfer tax, inheritance tax cases where the tax has already been paid before a court decision declaring the will on the basis of which the inheritance tax was calculated and paid invalid, and so on. . Issues are also resolved in favour of the taxpayer on the basis of the invocation of force majeure grounds (e.g. loss of the cash register due to theft, destruction of books and data due to fire/flood, failure to meet obligations due to serious illness, and so on).
Besides, there will also be cases in which sufficient case law will not in fact have had time to develop, especially in the case of "new" provisions. A typical example is the General Anti-Abuse Rule (GAC), which was introduced by Art. Indeed, in such cases, the BCC will rule without having the possibility to apply a wide range of case law on the same issue (see thus the Athens BCC 1356/2020 and 1050/2020). It is no coincidence that even among legal circles such decisions attract the greatest interest, as they introduce a first judgment on a specific issue.
Therefore, an appeal before the BCC, apart from being mandatory for a specific category of cases, also represents a real opportunity for the taxpayer. It is advisable for the taxpayer to take advantage of this opportunity in its entirety.
Can I file an appeal without consulting a lawyer?
An appeal can be filed without the assistance of a lawyer. Despite any formal requirements (procedural issues, documents to be produced, etc.), it is not particularly difficult - especially after some research on his part and informal communication with the Service - for a taxpayer to file an appeal on his own and even receive a response to it.
It goes without saying that in such cases the appeal will not be drafted with the care that a lawyer would have taken. The taxpayer cannot be kept up to date at all times on the latest developments in case-law, in the practice of the BPA and in administrative documents (circulars, instructions, decisions) which may indeed be useful in the case in question.
On the other hand, it is equally true that it is not impossible that the taxpayer could obtain a positive decision by means of such an 'inexpensive' appeal.
This is because it is possible, for example, that the official who will examine the appeal may be aware of certain case-law and that this lack of knowledge on the part of the taxpayer may not have any effect. It is also true that the BTI tends to 'rescue' appeals in which no reason is given which would lead to their admissibility (e.g. even though this reason does exist and was simply not mentioned due to ignorance when the appeal was drafted) or the correct provision is not invoked. In such cases, in view of the purpose of the Office (BAD), namely the immediate resolution of disputes that may be resolved at the tax administration stage, deficiencies are also examined ex officio and may not be raised by the applicant (see e.g. Athens CFI 1545/2019) or even if the applicant does not request the modification of the fine in accordance with the correct provisions (see e.g. Athens CFI 1374/2019 for a fine on fictitious invoices).
However, even though, as stated above, the assistance of a lawyer is not necessary (we have seen that there are cases in which the taxpayer may indeed be vindicated without even having stated the appropriate reasons), it remains strongly recommended. In particular, the greater the amount at stake, the more it is in the taxpayer's interest to consult a lawyer who will be familiar with the arguments that can and should be raised, the relevant provisions that will support them, and will also draw the attention of the official who will examine the appeal to case law or acts of the Administration (even previous decisions of the BIA) that he or she may be unaware of. Experience has shown us that the BCC refrains from considering only claims of unconstitutionality, leaving the discourse on this to the judiciary (most notably the invocation of grounds tending to the unconstitutionality of the ENFIA - n. 4223/2013).
However, it is highly recommended to obtain specialised legal advice already at the stage of the appeal and for the following reason: it is possible that certain grounds which were not raised in the appeal may not even be considered if they are raised, for the first time, before the Administrative Court. In fact, the possibility of challenging it is lost. It is certainly true that over time this issue has been mitigated (in the sense that the Courts no longer reject all the claims that are first brought before them, i.e. without having been raised before the Tribunal). However, there are still 'weapons' which, in order to be used for the first time before the Court, must be raised before the Tribunal.
An appeal therefore equips us with the tools we will have at our disposal throughout the entire process of challenging an act of the tax authority. A superficial first step is likely to have consequences throughout the entire procedure and to make the task of the lawyer who, at the stage of the judicial challenge, will now be called upon to defend the taxpayer's rights more difficult. There are not a few cases in which, when the client turns to a lawyer, the lawyer is in fact "tied up" in view of the shortcomings of the previous stages, the burden of which he has received the case.
But even in the case of a tax audit - i.e. at a time prior to the issue of the charging order - the absolutely appropriate action is to seek advice from a tax lawyer from that stage, i.e. already at the time of notification of the audit order. In addition to drafting opinions on the Audit Findings Note (AFN), other actions - before and after - will be strategically critical, with an eye always "focused" on challenging the tax and/or penalty that may be imposed.
In this respect, for example, in order for the taxpayer to effectively exercise his right to defend himself against the Authority's actions, the relevant provisions require that it be ensured that he has the fullest possible information on the transactions on which the audit bases its findings. A qualified legal adviser knows exactly which documents he can request from the tax authority and the cases in which he is entitled to request its cooperation, with the tax authority being obliged to comply with his request. What is interesting - and of great practical importance - is that any failure of the tax authority to respond to such requests of the taxpayer (due even to simple negligence of the officials), already at the stage of the audit, adds another arrow to the taxpayer's quiver, for the successful challenge of acts in the context of an appeal and so on (See Athens Court of Appeal 955/2017).