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Tax administration principles as boundaries of tax proceedings

The Tax Procedure Code is the basic regulation governing tax administration which is then modified by laws on individual taxes in partial aspects. Tax procedures are based on the principles of tax administration, and all provisions of the Tax Procedure Code should thus be interpreted in the spirit of these principles. The same principles should also be respected by the tax administrators in their day-to-day activities.

The basic principles of tax administration are listed at the very beginning of the Tax Procedure Code. They constitute the basic rules of its interpretation and application. These principles are:

  • the principle of legality
  • the principle of legal license (everything not forbidden is allowed)
  • the principles of restraint and proportionality
  • the principle of procedural equality
  • the principle of cooperation
  • the principle of instruction
  • the principle of helpfulness and decency
  • the principle of speed and economy
  • the principle of free evaluation of evidence
  • the principle of legitimate expectations
  • the principle of material truth
  • the principle of non-publicity and confidentiality
  • the principle of personal data gathering.

The individual principles are not specifically defined but are general maxims setting the boundaries within which the tax administration should operate. Nonetheless, the application of individual principles may be regulated in more detail by the specific provisions of the Tax Procedure Code. For instance, as regards the principle of confidentiality, the Tax Procedure Code lists authorities and institutions to which the tax administrator is entitled or even obliged to provide information without violating this principle. All the principles have one thing in common: they are directly binding upon the entire tax administration, i.e., on all its acts, even those outside tax proceedings. This means that tax administrators are obliged to follow these principles universally.

The direct binding effect of the basic tax administration principles also means that taxpayers may challenge and dispute the legality of a tax administrator’s conduct by referring to the principles. A judicial review of a tax administrator’s procedure in the context of the basic tax administration principles is a very practical use of the principles. Yet, as for other rules of tax administration, it is not enough to merely claim that a tax administrator acted contrary to the basic principles, but it is necessary to prove the violation of the principles and the impact that the unlawful conduct had on the taxpayer and the tax administrator's decision.

The basic tax administration principles do not just help the taxpayers but work the other way round, too, as they also apply to the taxpayers and all other persons participating in tax administration. Acting contrary to these principles may thus be held against them in subsequent proceedings. The Tax Procedure Code also provides for monetary penalties for certain undesirable conduct by persons participating in tax administration, which are based on the tax administration principles: for instance disciplinary fines to ensure a smooth and dignified course of the tax administration’s activities.