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A comprehensive draft of changes to the tax ordinance
13 December 2022 by lukasz@gtakademia.pl
The Ministry of Finance is working on the amendment of the tax ordinance. The proposed changes are extensive, and some of them are revolutionary and long-awaited, although the proposed solutions are still far from being ideal. Taxpayers may welcome the idea that the initiation of proceedings under the criminal fiscal code would no longer suspend the limitation period for a tax liability, and that tax liabilities secured by a mortgage or a lien could be statute-barred. However, some unfavorable changes are also planned, e.g. extending the possibilities of the tax office in the scope of blocking accounts.
The most important change from the taxpayers' point of view is the planned removal of the controversial provision of Art. 70 § 6 point 1 from the tax ordinance. This provision establishes, inter alia, the possibility of suspending the limitation period for a tax liability upon notification of the taxpayer of the initiation of fiscal criminal proceedings in the case of a tax offence or misdemeanor, if the offence (or misdemeanor) is related to the failure to perform this obligation.
Instrumentally initiated proceedings
The practice of many recent years shows that this provision has been abused many times by the tax authorities. Many criminal fiscal proceedings were initiated by the tax authorities purely instrumentally – only to postpone the limitation period for the tax liability, and thus to gain more time to conduct the tax proceedings and issue a final assessment decision in the case. At that time, activities within the framework of fiscal penal proceedings were either not taken at all or they were only apparent. Many tax disputes, in which – according to taxpayers – criminal fiscal proceedings were initiated only to postpone the limitation period for the tax liability itself, were the subject of verdicts in administrative courts.
The problem was noticed by, among others The Supreme Administrative Court. On May 24, 2021, in a bench of 7 judges The Court issued a resolution (I FPS 1/21) in which it expressed the view that administrative courts are entitled to examine whether the proceedings initiated by the tax authority were only instrumental. In other words: they can verify whether, in the light of the circumstances of a specific case, such proceedings were initiated due to the actual suspicion of a tax offence or misdemeanor, or whether the only reason for its initiation was to suspend the limitation period for the tax liability. The resolution had an impact on the attitude of the administrative courts, which cancelled the appealed decisions, ordering the tax authorities to prove the legitimacy of initiating fiscal penal proceedings.
Regardless of the increasing number of verdicts of administrative courts, the case of instrumentally initiated fiscal penal proceedings has caught the attention of the Ombudsman. In 2014, he challenged the controversial regulation to the Constitutional Tribunal, and moreover, the Ombudsman reported his participation in the proceedings initiated by three other complaints filed with the Constitutional Tribunal. However, none of these cases has been adjudicated to this day. On the other hand, in recent years, the Ombudsman has requested the Minister of Finance at least twice to initiate changes in the provisions of the tax ordinance aimed at limitating fiscal practices, consisting in excessive initiation of tax penal proceedings that often bear the hallmarks of abuse of law.
The case of instrumentally initiated fiscal penal proceedings has caught the attention of the Ombudsman. In 2014, he challenged the controversial provision to the Constitutional Tribunal, and moreover, the Ombudsman reported his participation in the proceedings initiated by three other complaints filed with the Constitutional Tribunal. However, none of these cases has been adjudicated to this day.
As soon as the Ministry of Finance started work on the amendment to the tax ordinance, there was a chance for the final removal of the controversial provision. If the amendment in this respect entered into force, it could theoretically affect the more efficient conduct of tax proceedings, because these would have to issue a final decision before the expiry of the limitation period, the course of which could not be so easily suspended instrumentally.
Repeal of a provision inconsistent with the Constitution
It is also considered to remove from the tax ordinance the provision of Art. 70 paragraph. 8, which currently excludes the possibility of limitation for liabilities secured by a mortgage or a fiscal lien – with the proviso that after the expiry of the limitation period, the enforcement of tax liabilities due is limited only to the subject of the mortgage or pledge. Such wording of the provision, which was already declared unconstitutional by the Tribunal in 2013 (SK 40/12), leads to a situation where some tax liabilities do not expire at all.
The repealed provision is going to be replaced by a new regulation stipulating that establishing a security for a tax liability in the form of a mortgage or pledge will interrupt the limitation period, which will start running from the beginning.
More options for blocking bank accounts
While the above changes meet the taxpayers' expectations, there are also a few in the draft that some consider too far-reaching. This applies in particular to extending the possibility for tax authorities to block bank accounts held by natural persons registered as entrepreneurs. It would come into force from the beginning of 2024. Currently, the tax office has the right to block such persons only from company bank accounts, VAT accounts, as well as term deposits and accounts of a cooperative savings and credit union member.
After introducing the proposed changes, the tax office will be able to block not only business accounts belonging to the entrepreneur (being a natural person), but also his savings and savings and checking accounts (excluding family accounts), as well as term savings deposit accounts established by such an entity.
The Ministry of Finance explains the proposed change with the necessity to tighten the provisions on STIR (Teleinformation System of the Clearing Chamber). According to the Ministry, practice shows that entrepreneurs circumvent the obligation to use a corporate settlement account by settling accounts with contractors using a private account. As a rule, the entrepreneur's savings are also transferred to the latter account.
The maximum time of the acceptable account blocking would also be extended from 72 to 96 hours. This would allow the tax authorities to collect evidence more effectively, allowing for a further extension of the blockade for three months, if, as a result of the proceedings conducted at that time, it turned out that there is a justified suspicion that the entrepreneur will not settle the tax liability with a value exceeding the equivalent of EUR 10,000 in PLN.
The draft expected soon
These are just some of the changes to the tax ordinance that the Ministry of Finance is working on. The draft has not yet been published on the website of the Government Legislative Center, but it should be expected in the near future.
Author: Małgorzata Sobońska-Szylińska, Barrister, MBA
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