Means Ensuring Protection of Taxpayers´ Rights in Estonian Tax Law
| Author | Lasse Lehis |
| Position | Lecturer of Financial Law |
| Pages | 100-107 |
Page 100
This article provides an overview of the most important means ensuring protection of taxpayers' rights in Estonian tax law. The article begins with a review of constitutional requirements and restrictions on levying taxes, followed by an overview specifically concerning the protection of taxpayers' rights in the procedure of collection.
Under § 113 of the Constitution, state taxes are provided by law in Estonia. The taxpayer's duty to pay a specific amount of tax is created upon the existence of the elements of an act fixed in law. All mandatory elements of a tax-law relationship must be fixed in law. The requirement provided in the Constitution has been further developed in § 8 of the Taxation Act, which states that "taxpayers are required to pay only such state and local taxes as are prescribed by law at the rates and pursuant to the procedure provided for in tax Acts and council regulations." Section 7 of the Taxation Act lists the circumstances that must be provided in a tax Act. In accordance with the definition of tax in § 2(1) of the Taxation Act, a tax is characterised, inter alia, by the fact that the obligation must be performed pursuant to the procedure, in the amount and during the terms prescribed in a tax Act or council regulation.
Section 157 of the Constitution entitles local governments to levy and collect taxes and to impose duties. Local taxes may be levied by rural municipality councils and city councils by tax regulations issued under the Local Taxes Act. In levying local taxes, the councils' freedom of decision is limited by the list of taxes (presently nine taxes) and the main characteristics set out in law.
The Decision of 23 March 1998 of the Constitutional Review Chamber of the Supreme Court (3-4-1-2-98 - RT1I 1998, 31/32, 432) holds that the requirement that "state taxes shall be provided by law", provided in § 113 of the Constitution, must be interpreted so that all mandatory elements of a tax-law relationship - taxpayer, object of tax, tax rate, tax recipient, the procedure for and due date of tax payment - must be fixed in law. The optional element of a tax-law relationship - allowances - must (if their application is wanted) also be provided by law.
Section 110 of the Constitution precludes the establishment of state taxes by decrees of the President. The adoption or amendment of tax Acts by a referendum is not permitted either (§ 106 of the Constitution). Therefore it can be asserted that in Estonia, the establishment of state taxes is the sovereign and unalienable right of the Parliament.
Before the Constitution entered into force, establishment of taxes (as well as solving other principal matters) by regulations of the Government was common in Estonia. This was permitted by § 3 of the Taxation Act passed on 28 December 1989 (ENSV ÜVT 1989, 41, 648; RT I 1994, 1, 5). In the rapidly changing life and unstable political and economic situation of those days, that was, without doubt, the only possible solution.
Unfortunately, it must be admitted that the law reservation clause has been violated in Estonia even after the entry into force of the Constitution. On 14 October 1997, the Riigikogu2 passed the Customs Tariffs Act (RT I 1997, 78/79, 1321); § 15(3) of the Act entitled the Government to establish and abolish applicable customs tariff rates fromPage 101zero to maximum rates set out in the Appendix to the Act, if customs tariffs were established without a fixed limit or for a period exceeding six months. Under § 15(5) of that Act, the Government of the Republic was also entitled to establish and abrogate special customs tariff rates regardless of their period of applicability. The Legal Chancellor held the opinion that, under § 113 of the Constitution, such delegation was inadmissible and made a proposal to the Riigikogu to harmonise the Customs Tariffs Act with the Constitution. As the Riigikogu did not support the proposal, the Legal Chancellor initiated a constitutional review procedure in the Supreme Court. Under the Decision of 23 March 1998 of the Constitutional Review Chamber of the Supreme Court (3-4-1-2-98 - RT I 1998, 31/32, 432), §§ 15(3) and (5) of the Customs Tariffs Act were repealed.
The decision of the Supreme Court stated that establishment of a tax must result in a tax-law relationship between the taxpayer and the tax recipient (state or local government). Hence an Act establishing a tax must cover all important tax-law relationship conditions, without which the legal relationship cannot exist. These important conditions are the taxpayer, tax recipient, object of tax, tax rate and the procedure and due dates of tax payment.
Even if just one of the important characteristics is not provided for in an Act, the tax as such is not provided for by the Act. Thus the decision on the object of tax or tax rate may not be delegated to the executive power. Such an important state matter as the establishment of taxes may not be delegated to the executive, because that would be in conflict with the objective of regulation-making and violate the principle of separation and balance of powers. The establishment and modification of customs duties is related to very many persons' financial obligations to the state. The Riigikogu, without knowing the applicable customs duty rates, cannot adequately proceed with the state budget, which must reflect all state income and expenditure. The Supreme Court also noted that continuous modification of tax rates at short notice violates the principle of legal certainty, which is a fundamental underlying democratic rule of law.
The concept of tax is not defined in the Constitution but the absence of a definition does not imply that the concept may be interpreted in an arbitrary manner. The concept of tax, as used in the Constitution, may have only such meaning as is attributed thereto by the theory and practice of the branch of law concerned. The Constitution cannot be required to define concepts. [1, p. 43] Naturally, failure to conform to the provisions of the Taxation Act cannot automatically create a conflict with the Constitution. At the same time, it cannot be denied that the provisions of § 2(1) and §§ 3, 7 and 8 of the Taxation Act derive from the theoretical conception of the tax-law relationship and this can be regarded as the legislator's own interpretation of § 113 of the Constitution.
Section 113 of the Constitution does not per se require that tax rates should not be provided as maximum and minimum limits. However, the limits of the freedom of choice, the potential number of taxpayers, the amount of money collectable by taxation and the possible frequency of modifying tax rates must be observed in this respect. The higher the number of persons influenced by a modification in tax rates and the bigger are the changes brought about thereby, the more careful the legislator must be in granting a delegation.
The requirement that state taxes must be provided by law is today expressed in the constitutions of most European countries. In many states, this provision is even further specified and several requirements on tax Acts have been fixed constitutionally. Hence, for example, the constitutions of Italy (Article 53), Portugal (Article 107) and Spain (Article 133) even require that income tax be progressive. The Constitution of Spain provides, inter alia, one important tax-law principle - the ability-to-pay-principle. The constitutions of the states referred to list tax liability in the catalogue of the primary duties of citizens. The establishment of taxes is based on the law reservation clause even when this is not provided expressis verbis in the constitution. In Germany, for example, any legal provision is regarded as a law under the Taxation Act (Abgabeordnung) but, nevertheless, both in theory and in court practice, the opinion that taxes may be established only by formal Acts has been maintained. [2, pp 105, 107]
The principle of legitimacy must also be followed in the implementation of tax Acts. In addition to the law reservation, the supremacy of law must also be taken into consideration. In collecting taxes, the text of the Act must be strictly adhered to; taxpayers' freedoms may not be restricted and the Act may not be construed in an arbitrary manner under any acts of the executive or under unwritten law. Tax liability may not be increased under any provision inferior to an Act. Tax liability is created immediately upon the existence of the elements of the act provided in the law.
The principle of legal certainty implies that a tax Act must be so specific as to result in the minimum number of possible different interpretations and choices. Any delegation of decisions and explanations to the executive power must be minimal. A...
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