Freedom of administration in the tax law and abuse of right

AuthorViorel Ros

Viorel Ros. Professor Ph.D., “Nicolae Titulescu” University, Bucharest (e-mail:

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The tax continues to be associated with constraint and oppression because it is, incontestably, a burden. This nature of the tax is revealed by its very legal definition when speaking about it as a “mandatory deduction, without consideration and non-refundable, for meeting needs of general interest”. Of course, it is a different burden than the robbery, the tribute or the requisitioning preceding it and in relation to which it represents progress, but just how big are the differences between the tax and the deductions preceding it? The impost, the tribute were levied sword in hand! The tax is usually paid willingly and, in case of refusal, it is levied by using more subtle means of coercion: enforcement by garnishment or by selling the tax debtor’s assets. Therefore, in our opinion, the tax seems an advanced tribute while, according to some authors, it represents even a “liberal technique” since it is the means of making citizens contribute to the needs of society and the personal needs of their leaders, leaving them maximum freedom”1.

Taxes, however coercive they are, should be regarded with understanding, because it is taxes that allow the operation of organized societies. For this reason, whether we pay them out of conviction or because we cannot avoid paying them (when avoiding paying them, people risk even criminal penalties), as long as the economies of countries are not sufficiently developed and the monetary resources are not sufficient for the population to be released from the burden of taxes, taxes will continue to be part of our life. And, as long as taxes exist, our individual freedom will be limited and the freedom of company administration will be limited, as well.

But how and why is this limitation of our freedom produced by means of taxes? The answer seems simple: the State collects a share of our revenue and our assets and it wants the share it collects to be as large as possible. And, in order for this share to be as large as possible, the State restricts our possibilities to decrease the taxable income, undertaking the right to control our documents and actions by which we attempt to ease our fiscal burden and to reconsider them according to its interests.

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1. Ideally taxable economic reality

The State, the tax authority and the lawmaker, in particular, have their eyes on the economic reality because this is the income that can be taxed, this is the source that keeps them alive. Nevertheless, in fact, there are important differences between the economic and the legal reality, between the taxable and the taxed reality for multiple reasons, some of them assignable to the State, others to the tax payers. Of course, the State and the tax authorities intend to tax reality and not appearances, but the State must act this way even when reality is less favorable to it than appearances.

However, the State is interested in the economic reality under multiple aspects: it generates it by the way in which it regulates social relationships, it develops it or, on the contrary, it makes it regress through its policies and the measures it adopts and implements, as well as by the way and efficiency with which it manages its revenue, among which fees, taxes and contributions are the most important.

The legal position of the State in the relationship regulated by the tax law is difficult to be qualified: a third party with regard to the private law legal relationships in which tax payers enter, the State is interested in these relationships because they generate taxable income and because the State is the eternal creditor (the State is rarely a debtor) of its tax payers, to which, most often, it is related only by citizenship relationships, without such a relationship being absolutely necessary for them to hold the position of tax debtors. Yet, in addition to the fact that the State has the position of tax creditor directly from and according to the law, the State enjoys other privileges as well: it has on its side not only the law (that it makes itself), but also the public force (that it also organizes and maintains) and, in the legal relationship under the tax law, regulated by public law norms, the parties are not on an equal position and the tax payer is the one who, in the relationship regulated by the tax law, has a position of inferiority to the State. The tax payer has an obligation (fundamental duty) to pay taxes but, in exchange for it, the State has no obligation for a consideration2. As a principle, the tax payer’s obligation to pay the tax has no correlative right. Of course, this is not the case for fees and contributions, the former usually being owed for a service supplied by a public institution and the contributions, for returning in various forms (pensions, aids, medical services) to the payers.

Being interested in the reality it taxes and in its claims and having full powers to act, the State also granted to itself the right of inspection over this economic reality, over the tax payers’ documents and actions and undertook the right of assessment of such documents and actions and the right to decide by itself whether such documents and actions comply with the regulations that it adopted as well and to which, it is true, we have agreed through the representatives sent to the Parliament. It is a power that is often abused by the authority and before which the tax payer has few means of defense.

Nevertheless, in fact, nowhere in the world do the States tax everything that, theoretically, might be taxed, but only what should actually be taxed. Taxable reality and taxed reality are two different things. The State tries to get as much as possible, tax payers try to give as less as possible and each of them acts according to its goal. For this reason, the economic reality in the matter of taxes is always opposed, with more or less success, by the legal reality, but the latter also includes, unfortunately, the differentiated treatment of tax payers and the advantages (not always fair) granted to some of them by the State itself. The immeasurable rapacity of the State, in its chase for resources, is opposed by tax resistance in various forms: some of them legal, others illegal.

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Between these extremes, only the midway is left, which is characterized by moderation, proportionality, dialogue, respect to the law and to the rights of others, equality before the law and authority, individual freedom and freedom of trade. And justice, which is called to temper the excesses of any party in the relationship regulated by the tax law and to penalize them.

2. Exercise of the right of assessment and the principle of proportionality

Since the State is interested in the economic reality, the right of assessment in relation to the tax payers’ documents and actions is acknowledged to it, as a principle. Nevertheless, the principle thus stated in art. 6 of the Fiscal Procedure Code ("exercise of the right of assessment”) is not found in any other regulation, and its clarification in the Romanian Tax Procedure Code seems to us to establish not a normal rule of conduct, but a provision likely to grant to the tax body a right and full power of assessment.

Indeed, according to art. 6 of the Tax Procedure Code, „the tax authority is entitled to assess, within the limits of its duties and competences, the relevance of fiscal situations and to adopt a solution admitted by law, grounded on full findings on all the clarifying circumstances in the case”.

The agreement between the conduct of civil servants and their decisions, on the one hand, and the law, on the other hand, is the obligation of every civil servant, authority or magistracy and not just of the fiscal agent, an obligation derived from the principle of lawfulness, which is a fundamental principle in all the law systems, for all branches of law. This principle is also established by art. 1, paragraphs 3) and 5) and art. 16, paragraph 2) of the Constitution of Romania, which sets forth strict compliance with the law by all its recipients: the citizens and the State, the latter meaning its institutions and its civil servants. For this reason, the principle of the rule of law must be an integral part of the administrative-fiscal culture as well.

In a democratic country, the rule of law appears as an answer to the need for legitimacy, the rule of law being required for the exercise of public power. The collection of taxes, fees and contributions is vital for any State (because it allows its operation), but their good administration cannot be a goal in itself, but also a method of materializing the rule of law in the sensitive field of taxation, which is a part of our life, both as a society and as individuals.

In the Community law, lawfulness, and not the exercise of the right of assessment, is regarded as a principle of good administration, the idea being formulated in the Recommendation CM/Rec(2007)7 of 20.06.2007 of the Committee of Ministers of the Council of Europe to the member states of the Council of Europe on good administration. Art. 2 of this recommendation refers to the principle of lawfulness in administration, which also includes the tax planning, and has the following wording:

„(1) Public authorities shall act in accordance with the law. They shall not take arbitrary measures , even when exercising their discretion .

(2) They shall comply with domestic law, international law and the general principles of law...

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