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Principles of tax administration: speed and economy

The principles of tax administration are not just abstract boundaries, but a basis for a whole range of very concrete benefits for taxpayers that are good to keep in mind when the tax authorities come knocking.

We wrote about the principles in general here; and in the December issue of Tax and Legal Update, we looked into the basic principles of tax administration: the principle of legality, the principle of legal licence, and the principle of self-restraint and proportionality. In this article, we shed some light on the principle of speed and economy (cost-effectiveness) of tax administration.

The principle of speed

The smooth running of the proceedings without unnecessary delays is undoubtedly in the interest of all parties involved in tax administration. By delays in proceedings or procedures we mean unreasonable and unjustified inaction. However, this cannot be judged solely by the length of the proceedings: the specifics of each individual case must be considered.

To protect against the tax administrator’s inaction, the Tax Procedure Code provides several sanctions. In some cases, the tax administrator’s inaction may result in a very positive outcome for the taxpayer: for instance, if the tax administrator fails to decide on a request for an extension of a time limit, it may be deemed that the time limit has been met. Also, if the tax authority fails to decide on an appeal against an order to secure tax within a set deadline, the order becomes ineffective. You can actively defend yourself against inaction by lodging a motion for protection against inaction with the nearest superior tax authority. The Tax Procedure Code also provides for situations where the tax authority withholds funds that should have been returned: in such a case, the tax administrator is obliged to pay interest to the taxpayer.

Although this principle applies mainly to tax administrators, bear in mind that inaction by taxpayers is also associated with a number of adverse consequences.

The principle of economy

This principle is based on the principle of proportionality and applies to the entire tax administration. It means that the tax administrator should proceed so that the taxpayers, third parties, and the tax administrator do not incur unnecessary costs.

The principle of (procedural) economy is manifested, for example, by the tax administrator not requiring from taxpayers data and information that can be obtained from other public authorities. Another manifestation of this principle are joint acts, whereby the tax administrator can, e.g., conduct a tax inspection for several taxable periods or recover arrears from various tax proceedings at once. However, this approach has its limits and should serve to eliminate any unnecessary burden on the parties concerned and not to make the authorities’ work easier. Should a taxpayer believe that their rights have been infringed upon by a joint act, they may defend themselves by an appeal or before administrative courts.