Almost four years ago, under pressure from its European partners and the IMF exercised by means of economic adjustment programs and loan agreements broadly known as “memoranda,” the Greek State adopted a new tax procedural code.
The main aim of the Greek Government in adopting the new code was – in a bet against all odds – to apply a more efficient tax implementation regime. Traditionally, tackling tax evasion had been a dead end; pre-election statements made by the various governments against professional tax evaders were not followed by substantial actions, and therefore the fiscal gap in the state budget grew in geometric proportion. In any case, the need for tax collection cannot just echo as “wishful thinking,” since effective tax collection mechanisms are imperative for the viable function of the state. In this context, the legal regime adopted into Greek reality seemed represent the ultimum refugium.
By virtue of L. 4174/2013 (the “Tax Procedure Code”), a new, more flexible, and agile tax imposition scheme was adopted, which provides for: (a) a vast number of tax audits to be conducted on a “fast track” basis; (b) the implementation and incorporation of new technologies into fiscal mechanisms; and (c) turning the tackling of tax evasion once and for all into a first page note on the political agenda.
However, even a new Tax Procedure Code cannot keep audit reports from occasionally being incorrect and tax payers occasionally being threatened with major penalties even where it is evident that no tax violation has been committed. Thus, the Greek legislator chose to introduce a quick and in-depth re-examination of audit reports in the form of a “quasi-judicial” recourse as a counter-balance to the new taxation process, with the added benefit that the constitution of an out-of-court tribunal with extensive authority would facilitate the decongestion of cramped Administrative Courts, where, at the moment, judicial review of tax imposing acts usually occurs almost five years after submission.
The “quasi-judicial” regime was introduced by virtue of art. 63 of the Tax Procedure Code, which states that each taxpayer who wants to challenge an act or omission of the tax authorities shall be entitled to file a claim before the authority which issued (or failed to issue, as the case may be) the relevant act. Subsequently and by virtue of authorization transferred to the Governor of the Independent Public Revenues Authority, circular No. 1064 /27.4.2017 was issued, describing the process by which the right to file the claim is to be exercised. The “quasi-judicial” claim must be filed within 30 days from the date the taxpayer is notified of the relevant act. The competent authority to hear the recourse is the Directorate for the Resolution of Tax Disputes, a quasi-judicial body with full power to modify or even fully annul the challenged act. Its decision must be issued within 120 days of filing; otherwise it shall be regarded as tacitly rejected. What is more, the claim is a precondition for filing a judicial action at a later stage, since direct challenge before an administrative court is forbidden. Filing the quasi-judicial claim suspends payment of 50% of the imposed tax and penalties. However, the applicant is free to file a full tax imposition suspension application with the same authority.
Recent experience shows that this new regime has rectified many irregularities of the previous tax imposition scheme. At no cost (apart from legal fees, in cases where taxpayers are represented by lawyers), anyone can ask to have his or her tax case reexamined. As the Directorate has extensive power to investigate the accuracy of the audit reports, to ask for complimentary evidence and with complete transparency, the “quasi-judicial” regime must be praised as an important development in Greek Administrative Law. As tight time frames are set for the issuance of final decisions, parties can expect that their cases will be heard and resolved within a short period of time, while still reserving their right to bring a judicial action. In addition, the introduction of the new tax recourse regime seems very appealing to prospective investors who are confident that any dispute against the Greek State on tax issues will be resolved in a timely manner – providing at least one more reason why they should invest in Greece.
By Panagiotis Drakopoulos, Senior Partner, and Evangelos Margaritis, Senior Associate, Drakopoulos
This Article was originally published in Issue 4.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.