quarta-feira, maio 21, 2008

France: French Tax Administration conduct not compatible with the European Convention of Human Rights

The European Court of Human Rights (ECHR) recently judged that a provision of the French Tax Code allowing the French tax administration (FTA) to carry out a search in any place of business is incompatible with article 6.1 of the European Convention (February 21 2008; n°18497/03; 3rd section, Ravon and others).
The provision at stake, article L 16 B of the "Livre des procédures fiscales" was enacted in 1984. It allows the FTA to inspect any professional location when a taxpayer is suspected not to be compliant with its tax obligations. The non compliance concept encompasses a broad scope of situations.
When a visit is made by the FTA according to this provision, it looks like a criminal investigation, with many officials arriving early in the morning, seizing documents, invoices and any paper linked to the business. Until 1984, the FTA operated with the support of a provision which was written at the end of World War II, in order to control the prices of goods. Using such an outdated provision for tax purposes was finally considered as a diversion of the law. For this reason a new law was enacted.
When preparing the new law, the FTA had to create a tool enabling them to have the means of a criminal investigation without loosing the control of the proceedings to a judge. So it was decided that a judge must approve an FTA visit before it takes place. To get the judge's permission, the FTA has to prove it has sufficient evidence to suspect fraud.
If the judge permitting the visit is not familiar with tax issues then the elements used by the FTA may sometimes be questionable; for example, they can include unreliable statements by a competitor or an employee who has been dismissed. In order to balance the lack of quality of such kind of information, the FTA tries to give the judge a significant number of documents. As a consequence, the judge has a few hours to examine hundreds or thousands of pages of paper before making his decision.
When the FTA receives evidence of fraud, it can do without making a visit. The visit is only necessary when there is suspicion, not evidence. In this context, the part of the judge is to guarantee that the facts on which the suspicion lies are valid.
It is precisely because of the judge's role that the ECHR was able to apply article 6 of the European Convention which aims to guarantee a right to a fair trial. This provision is not applicable to tax matters but, because of judge's role, given by article L 16 B, the ECHR decided that article 6 of the convention was applicable.(...)

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