Introduction

In one of its initial articles, the Constitution of the Czech Republic codifies as one of the main principles of a democratic legal state -the principle of separation of powers. It presents three branches of power, mutually separated and controlled by a system of “checks and balances”.

Justice and law can exist in their perfect form only in ideal conditions. These represent some kind of a model situation, but in practice, the form of legal principles is adjusted to all motion, processes, events and functioning of society. It is a duty of each of us (whether in the position of an ordinary citizen, a tax entity or as part of a public executive body) to protect their nature and not to contribute to their violation by our intentional actions. Separation of power does not consist in mutual contempt between the individual branches of state power, but in their mutual respect. Separation of power does not mean a distance or complete isolation, but cooperation and pulling on the same end of the rope …without cooperation of all branches of state power and their mutual respect, democracy and its principles will not be fulfilled.

Judicial power in the Czech Republic is the only branch of state power, to which entitlement to binding interpretation of the law pertains. The binding effect of the decisions of administrative courts and their subsequent observance is part of justice and a guarantee of a right to just and equal access for all tax entities. This right as part of the predictability right ensures that the same cases are assessed according to the same principles in practice and that in their conclusion a different legal evaluation does not occur, and related unequal sanction. I accentuate the words “binding effect”, to what extent this exactly is the key in decisions of the bodies of the tax administration as part of the executive power. Disrespecting legal power, which court decisions have, undermines not only the foundations of a legal state and democracy itself, but it also infringes on the principle of cost-efficiency due to unnecessary legal disputes arising. A different approach when resolving tax cases on the part of financial authorities compared to the case-law of the Supreme Administrative Court forces tax entities to further and further legal disputes, which relates in direct proportion to an increase of costs on both sides.

There are several specific examples in practice of court decisions being disrespected by bodies of the financial administration.

Interests for withholding excessive VAT deductions

The General Financial Directorate has decided to take up a negative position in the case of payment of interests for the period of withholding excessive VAT deductions, for example. According to the Court of Justice of the European Union, withholding excessive deduction for the purposes of its verification is an inadequate intervention in the ownership right of the payer, and he is therefore entitled to financial compensation in the form of interests. The Supreme Administrative Court reached the same conclusion in its decision file no. 7 Aps 3/2013-34, in the KORDÁRNA case. The financial administration arbitrarily viewed this as a legal opinion without binding effect, which it does not consider a reflection of constant case-law. Without further explanation and due arguments, it

did not reflect the general conclusion of the judgment when handling other cases related to withholding tax deduction. I dare claim that the financial administration neglected the fact that what matters is not the quantity and existence of other judgments with a similar legal opinion, but the existence of the judgment itself and the quality of its reasoning. As part of the executive branch of the state it is obliged to respect it and abide by it. Many legal disputes with the given issue have taken place since then, before the financial administration identified with the conclusion of administrative judiciary and decided to proceed analogically when handling similar tax cases.

Sending authorisations for tax declaration postponement

The financial administration also saw as an isolated court decision the judgment of the Supreme Administrative Court file no. 4 Afs 68/2015-35, which was to be the key one in resolving a dispute related to the sending of authorisations for postponement of tax declaration to financial authorities. According to this decision, authorisation sent on the last day of the deadline by post is considered submitted in time and the tax entity is entitled to submit the income tax declaration within a prolonged deadline until July 1 without any recourse. The bodies of the tax administration continued in their previous administrative practice and only reflected authorisations delivered to the financial authority on April 1. Despite the decision, they were of the option that “the authorisation must be applied at the respective local tax administrator within the deadline for submission of the tax declaration”, otherwise it is submitted belatedly. The situation was repeated. Only on the basis of further legal disputes with the same conclusion has the financial administration decided to accept this viewpoint and considered the respective authorisations submitted on the last day of the deadline by post as being submitted in time.

What did the Supreme Administrative Court say?

The option of disputing and disrespecting general conclusions of courts as such is not forbidden for bodies of the financial administration. In practice, though, an important condition is often neglected. To disrespect judiciary power, it is not sufficient to note insufficient quality of the conclusion of the case, it is not sufficient to disagree without due reasoning. Disapproving approach in handling tax cases needs to be supported by reasoning of “greater” argumentation power as the reasoning of the decision itself. Proofs must have adequate informative value, arguments must be complex, thorough, based on logic and in keeping with the applicable legal situation. The mere negating attitude of bodies of the financial administration has been rejected by the Supreme Administrative Court itself in its decision, stating: “it is necessary for bodies of the financial administration to proceed in their administrative practice, that is also within further proceedings in the currently handled matter, in agreement with the conclusion ensuing from the mentioned judgment. The bodies of the tax administration should therefore reflect the legal opinion stated in the mentioned judgment, and should respect it, too, unless they found truly serious counter-arguments to the arguments stated in it, which the Supreme Administrative Court has not yet considered.”

Conclusion

Tax collection and observance of tax discipline is not the only legitimate goal and value of our society. In many cases, there is often a conflict of interests and at the same time a violation of the fundamental

rights and freedoms of individuals. Here the priority varies and every case needs to be assessed in wider context with regard to the fundamental principles of a legal state.

Ivan Fučík & Soňa Hanigovská