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Council of State rules tax audits may not use evidence beyond 5-year limitation

Greece’s top court, the Council of state ruled on Wednesday that the tax service does not have the right to take into consideration transactions and deposits of bank accounts in Greece that are older than five years from the time of its audit.  It is the second ruling of CoS that tax audits beyond the 5-year-limitation are against the Constitution.

The country’s highest administrative court was asked to rule on the audit of a deceased businessman’s assets for the time period of 2001-2008. His daughter, who stood to inherit, contested the decision of the Greek tax service to use bank account transactions as supplementary evidence for outstanding tax, past the five-year limitation.

In its ruling, the Council of State said that the tax authorities were responsible for knowing and using the information within five years, and could therefore not use as supplementary evidence information that “was ignored or not taken properly into consideration”, as set out by the law, past that statute of limitations.

In its ruling, the judges criticised the tax services directly, by stating that “among the basic and regular means of checking the accuracy of tax returns during an audit, which should be conducted within the five-year period of time (…), is the review of the balance and transactions of bank accounts of the taxpayer in this country,” and these balances in no way could serve as supplementary evidence to extend the five-year statute of limitations.

If that were the case, the court said, the rule of limitation would have no application in essence. 
The five-year limitation must also be set ahead of time, and its extension is only possible under specific circumstances, according to the Greek constitution – in other words, a regulation to extend the statute of limitations must be set at most one year after the year in which the tax obligation is outstanding. To introduce a law, therefore, “about extending the time of write-off of tax debts which were due on a calendar year preceding the year before the publication of such a law, is indefensible, as contrary to the principle of rule of law,” it said, as it would retroactively change the legal status of the outstanding debt, to the detriment of taxpayers. amna.gr

It is the second ruling of CoS that tax audits beyond the 5-year-limitation are against the Constitution.

Hundreds of thousands of tax audits going back to 2001 had to be cancelled following the ruling of the Council of State in June 2017. The Plenary decided that tax audits going beyond the five-year limit are against the Constitution. The Council of State decision is final and irrevocable.

The ruling affects more than 1,000, 000 tax payers and the cases of large scale tax evasion and several thousands of suspects whose names are on the so-called Lagarde-List and the Borjans-List. The lists containing names of Greeks with bank accounts abroad.

In an effort to increase revenues from tax evasion, the Finance Ministry wanted tax audits to begin already from 2001.

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