Tax administrators obliged to continuously review conditions for securing tax
An order to secure tax (a securing order) issued by a tax administrator should not be permanent or irreversible. The taxpayers themselves may contribute to its end. At the same time, tax administrators have the duty to regularly review the continuance of the conditions for the securing order; if they fail to do so, procedural consequences may follow.
A securing order is an instrument the financial administration uses to secure tax that is not yet due or assessed. Recently, it has employed this tool all too frequently. The length of time (duration) of the securing orders has also been criticised by both the taxpayers and the professional public. Although tax administrators usually justify the high frequency of securing orders by their fight against tax evasion, the decision-making practice of the Supreme Administrative Court has now corrected this approach to some degree.
In its recent judgement (No. 1 Afs 88/2017) the SAC first noted, yet again, that a securing order is a rather drastic measure that may have a significant effect on taxpayers’ property and, in some cases, their very existence. The court then dealt with justifying the length of time for which tax may thus be secured. It stated that a tax security’s extended duration in itself may not be sufficient to conclude that securing the tax had not been justified. According to the SAC, the duration, and possibly the termination of the security always depend on the concrete reasons for which the securing order had been issued in the first place. Taxpayers affected by a securing order have the option to prove to the tax administrator that the reasons for securing the tax no longer exist, or that their relevance has weakened. In this respect, the tax administrator has the duty to review whether the conditions for the existence of the securing order, as stipulated by law, are still being met. Proving the effect of the securing order on the taxpayer’s economic activity also plays an important role.
Considering the fatal consequences that securing orders may have, the SAC concluded that over the entire duration of the securing order, tax administrators have the duty to periodically review whether the reasons for securing tax still exist and to note the results of such reviews in their files. In other words, tax administrators are obliged to continuously review whether the statutory conditions for the issuance/existence of the securing order are still being met. If such conditions no longer exist, the tax administrators have to terminate the effectiveness of their decision to secure tax.