The application of a compulsory mortgage in the course of tax inspection SK 40/12
The application of a compulsory mortgage “if it may be reasonably expected that a tax liability will not be performed” is consistent with the Constitution. However, what is inconsistent with the Constitution is the complete exclusion of a limitation period with regard to tax liabilities secured with a compulsory mortgage.
At the hearing on 8 October 2013 at 9 a.m., the Constitutional Tribunal considered joined constitutional complaints, submitted by a limited liability company, which concerned the application of a compulsory mortgage in the course of tax inspection.
The Constitutional Tribunal adjudicated that:
- Article 33(2)(2) in conjunction with Article 33(1) of the Act of 29 August 1997 - Tax Ordinance, in the version which was binding from 1 January 2003 until 31 August 2005, insofar as it provided that a tax liability was to be secured in the course of tax inspection if it might be “reasonably expected” that a tax liability would not be performed, was consistent with Article 45(1) as well as Article 64(3) in conjunction with Article 2 and Article 31(3) of the Constitution.
- Article 70(6) of the Act referred to in point 1, in the version which was binding from 1 January 1998 until 31 December 2002, was inconsistent with Article 64(2) of the Constitution.
As to the remainder, the Tribunal discontinued the proceedings.
The premiss that “it may be reasonably expected that a tax liability will not be performed” does not restrict the scope of a judicial review of decisions about the application of a compulsory mortgage in the course of tax inspection, conducted by administrative courts. The extent to which the said premiss is general does not go beyond constitutional standards that arise from the principle of appropriate legislation and the principle of protection of citizens’ trust in the state and its laws.
This allows tax authorities (under the supervision of administrative courts) to properly determine a relation between competing values - the right of ownership vested in a given tax payer and his/her obligation to pay taxes.Tax authorities are not only obliged to prove (by indicating specific elements of the situation of the taxpayer, and in particular his/her financial situation) that there is likelihood of his/her insolvency, but they should also reveal detailed and actual reasons for the application of security in a decision to establish security.
The payment of taxes is a universal obligation and the Constitution does not provide for “the right to a limitation period” with regard to tax liabilities. However, since the legislator has decided to introduce that institution, he should adhere to constitutional standards within that scope. The complete lack of a limitation period with regard to tax liabilities secured with a compulsory mortgage in the course of tax inspection results in a situation where the institution of limitation is devoid of its content and has become illusory. What results from that regulation is varied temporal scope of taxpayers’ obligations, depending on an arbitrary criterion, i.e. the ownership of immovable properties which may be secured with a compulsory mortgage, regardless of the origin, character and scope of overdue tax liabilities or the conduct of a given taxpayer during tax inspection. The same purpose (i.e. the guarantee of maximum tax collection) may be achieved by methods which are less burdensome for taxpayers, i.e. the suspension of a limitation period during the course of tax inspection. Thus, the complete lack of a limitation period with regard to tax liabilities secured with a compulsory mortgage goes beyond the scope of regulatory freedom that has been granted to the legislator within the scope of tax law.
Challenged Article 70(6) of the Tax Ordinance in the version under examination ceased, by the legislator’s decision, to be binding on 31 December 2002. Its current counterpart is Article 70(8) of the Tax Ordinance, which raises similar doubts and requires urgent intervention by the legislator.
The hearing was presided over by Judge Teresa Liszcz, and the Judge Rapporteur was Judge Wojciech Hermeliński.
The judgment is final and its operative part shall be published in the Journal of Laws.