Tax Secrecy and Tax Transparency: The relevance of Confidentiality in Greek tax law

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Tax Secrecy and Tax Transparency: The relevance of Confidentiality in Greek tax law
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    Greece  Katerina Pantazatou 1.   Overview 1.1.    Historical Development More than one century ago, tax secrecy not only was not protected, but Law ΓΡΜΒ/1906 (Νόμος ΓΡΜΒ/1906) on business taxation provided that the taxpayers’ lists would be published and posted at the respective town halls for 15 days, so as to give anyone the possibility to object to and ask for the classification of the taxpayers to a higher tax base. Tax secrecy first appeared and was institutionalized in 1917, with law decree 1043/1917 (Νομοθετικό   Διάταγμα 1043/1917), Article 12 on the taxation of “extraordinary gains” 1 . This article stipulated that tax authorities were bound by confidentiality with regard to the tax data they collected. Since then many  provisions of laws, law decrees and presidential decrees have referred to tax secrecy and tax transparency 2 . Since all the aforementioned provisions guaranteed tax secrecy, it can be deduced that the spirit governing the laws of the past was one of trust between the State and the taxpayers, encouraging the taxpayer to declare his real taxable income and ensuring that the State would collect the right amount of taxes. Although Law 1640/1919 (Νόμος1640/1919) gave the tax authorities very  broad competences on the collection of data and the control of their truthfulness 3 , it introduced tax secrecy also for regular gains 4 . Law decree 3323/1955 (Νομοθετικό Διάταγμα 3323/1955 ) abolished Law 1640/1919, and constituted the basis for the current Code of Income Taxation (Κώδικας Φορολογίας Εισοδήματος, ΚΦΕ). Since then a few changes have taken place, but overall it can be argued that laws, law and  presidential decrees adopted in the meantime were directed towards the better  protection and more efficient protection of tax secrecy 5 . In contrast to the general tendency towards more protection of tax secrecy, I  believe that the turning point and possibly decisive factor in the definition and mutation of the scope of tax secrecy and tax transparency has been the debt crisis 1  It is noteworthy that the aforementioned provisos were introduced directly from  Articles 18 paras. 3 and 19 of the French Law of the 1st of July 1916 on the taxation of war profits. 2  For example Article 33 of the law decree 1640/1919, Article 19 of the law decree 1839/1951, Article 69 of the law decree 3323/1955, Article 16 of the law decree 3843/1958 and Article 44 of the Presidential Decree 99/1977 (99/1977). 3  Article 33 of the Law 1640/1919. 4  Article 43of the Law 1640/1919. 5  Gradually the protection of tax secrecy was introduced for all taxable items such as income, VAT, inheritance, etc.  2   that hit Greece in 2008. Since then, the increasing need for balancing the State’s  budget and subsequently the need for the combatting of tax evasion, the number one cause of the shrinkage of the State’s budget has somehow “broken” this relationship of “trust” between the State and the taxpayers. The number of laws regarding means to fight tax evasion and to increase the State’s budget adopted since the start of the crisis is arithmetically disproportional compared to the total number in the past: In terms of quality, illustratively, the recent Law 3842/2010 (Νόμος 3842/2010), introduced in 2010, on the “restoration of tax justice and the combat of tax evasion” was cons idered the major tax reform in Greece since the restoration of democracy in 1974 6 . 1.2.   General Legal Framework The Greek example, with regard to the overall tax system (including tax secrecy and tax transparency) has infamously been, lately, in the microscope of the troika 7 , which consistently asks for its reform. The main problems identified by the troika concern the facilitation of the collection of taxes and the need for greater tax transparency, in order to combat one of the major culprits of the Greek debt crisis: tax evasion. The Greek State has recently commenced a marathon of tax reforms with the aforementioned purpose. The debt crisis Greece was and still is facing has intensified the need for the combatting of tax evasion, so that Greece can recover important amounts escaping taxes. As it will be explained the general legal framework covering tax secrecy and tax transparency has altered, or to put it better, has been enriched after the start of the debt crisis. One of the first steps taken, with a view to fighting tax evasion, was the reinforcement of the role of the tax authorities in the collection of taxes. The main instrument/tax authority dealing with most regular tax affairs is the Public Economic Services (Δημόσιες Οικονομικές Υπηρεσίες, Δ.Ο.Υ.), hereinafter DOYs which are divided in several sub departments sectorally and geographically 8 . Tax secrecy is established in Article 85 of the Code of Income Taxation and covers the tax returns of the taxpayers, the tax reports, the decisions of the head of the DOYs, and in general any tax related information pertaining to the taxpayer’s file 9 . This secrecy is gene ral and “absolute” and is thus valid against any third party in relation to the taxpayer and thus, this information cannot be disclosed to any  public entity, not even to judicial authorities 10  (see however, exceptions below). 6   Ν. Μπάρμπας, ‘Φορολογία Εισοδήματος στον νέο φορολογικό Νόμο (ν. 3842/2010)’ , Εφημερίδα Διοικητικού Δικαίου, Τεύχος 2  (2010), pp. 132-141, (p. 132). 7  The IMF, the European Commission and the European Central Bank. 8  See infra, under section 4. 9    Δ. Σταματόπουλος, Α. Καραβοκύρης, Φορολογία Εισοδήματος Φυσικών και Νομικών Προσώπων  , (Αθήνα: Σταματόπουλος, Καραβοκύρης, 2009), p. 2773. 10  See POL 289/16-8-69 ( Πολυγραφημένη   Υπουργική   Εγκύκλιος  289/16-869), Opinion Legal Council of the State ( Γνωμοδότηση   Νομικού Συμβουλίου του Κράτους) 833/59 (1959)      3   The general legal framework covering tax secrecy and tax transparency can be delineated by special laws referring to income taxation, the Code of Income Taxation and laws relating to data protection, in particular Law 2472/1997 (Νόμος 2472/1997) which transposed Directive 95/46/EC into Greek law 11 . In addition, of relevance is Article 57 of the Civil Code (Αστικός Κώδικας) on the protection of a  person’s personality (δικαίωμα στην προσωπικότητα). 12  Although there have been several cases of first instance and supreme courts adjudicating on the balance  between data protection and the need for tax transparency, Greece belongs to a civil law jurisdiction and the courts’ judgments are not covered by the power of  precedence. 1.2.1.    Relevant Constitutional provisions Secrecy of communications is constitutionally protected in Article 19 of the Greek Constitution (Σύνταγμα της Ελλάδος). Despite the literal reference to the term “secrecy” in Article 19, tax secrecy is more related to the fundamental Article 2 (1) of the Constitution; on the protection of the human dignity and Article 5(1) on the  protection of the free development of someone’s personality 13 , and his participation in the social, economic and political life of the country, as long as he does not encroach upon other peoples’ rights and he does n ot offend public morals. However, after the constitutional revision of 2001, the Greek Constitution now explicitly protects the collection, processing and use of personal data 14 , in accordance with law 2472/1997. This protection is ensured by an independent authority as the Constitution states 15 , the Hellenic Data Protection Authority (Αρχή Προστασίας Προσωπικών Δεδομένων), hereinafter HDPA, which is responsible for monitoring the protection of all personal data (including tax and bank secrecy and secrecy of communications)  16   17 . A law sets the conditions upon which courts are not bound by the communications secrecy, in cases of public security or the 11  The main law decree covering data protection is: Law 2472/1997. 12    Article 57 of the Greek Civil Code provides that: “A person who has suffered an unlawful infringement on his personality has the right to claim the cessation of such infringement as also the non-recurrence thereof in the future. A claim for compensation, according to the provisions about tort, is not excluded”.   13  ‘[...] The right of personality encapsulates a number of rights that compose one  person’s being, amongst which are each person’s value, which is further reflected in the the perception and appreciation others have for him, his mental health and his emotional world  .‘ (Free translation from Εφετείο Θεσσαλονίκης: 657/2009) : Original text: [...]   το δικαίωμα της προσωπικότητας, το οποίο αποτελεί πλέγμα αγαθών που συνθέτουν την υπόσταση του προσώπου     με το οποίο είναι αναπόσπαστα συνδεδεμένα. Τέτοια προστατευόμενα αγαθά είναι, εξάλλου και η τιμή κάθε ανθρώπου, η οποία αντικατοπτρίζεται, στην αντίληψη και την εκτίμηση που έχουν οι άλλοι γι’ αυτόν, η ψυχική υγεία και ο συναισθηματικός κόσμος το ατόμου.   14  Greek Constitution Article 9A. 15  Greek Constitution, Ibid. 16  Greek Constitution, Article 19 para. 1. 17  Greek Constitution, Art. 19 para. 2.  4   identification of particularly serious crimes 18 . In line with this, the use of any evidence acquired in violation of the aforementioned paragraphs, is illegal and is thus, prohibited 19 . The constitutional provisions establishing (directly 20  and indirectly 21 ) the right of the people to have access to the administrative data/elements in the light of the  principle of administrative transparency are also set to encourage tax transparency and can undermine the right to tax secrecy. Overall, it can be argued that the constitutional protection of tax secrecy cannot  be found in one article of the Constitution, but can be deduced by the aforementioned provisions and the overall spirit of the Constitution. As expected, the conflicting rights at issue are the right of personality and informational self-determination (art. 9A of the Constitution) against the right of accessing information (Article 5A of the Constitution), the development of the  personality and participation in the country’s social, economic and political life (Article 5 of the Constitution), the protection of research and science (Article 16 of the Constitution) and the providing of legal protection (Article 20 of the Constitution). 1.2.2.    Most important laws dealing with tax secrecy In our case, tax secrecy is conceived as a person’s right to informational self  - determination as opposed to the State’s and potentially another person’s right to access information. All data which create or determine the tax relationships of a natural or legal person in the framework of direct or indirect taxation are covered  by tax secrecy 22 . The latter right supposedly serves not only the protection of the taxpayer but also the protection of the public interest, since in this way taxpayers will provide more easily the tax authorities the needed data for the determination of their taxable income 23 . Clearly, the need for tax transparency has budgetary ramifications, affecting equally the State and the individual. In cases of conflicts of rights, the Constitution (Article 25 para. 1) establishes the principle of proportionality. In general, it can be argued that tax secrecy and tax transparency are tackled by the most specific Article 85 of the Code for Income Taxation, as transposed by the law decree (Προεδρικό Διάταγμα) 2238/1994; however, provisions which reinforce the protection of tax secrecy can be found in other decrees such as the presidential 18  Greek Constitution, Article 19 para. 1. 19  Greek Constitution, Article 19 para. 3. 20  Greek Constitution, Article 10 para. 3 and Article 5A. 21  Greek Constitution Articles 1, 2 paras. 1, 5 paras. 1, 10 paras. 1 and 20. 22  General introduction on Article 69 of Law decree 3323/1955. 23    Α . Κωνσταντινίδης, ‘Το   φορολογικό   απόρρητο’, Ποινικά     Χρονικά  , (1989), p.3, Θ . Ψυχογιός, ‘Το   φορολογικό   απόρρητο’,  Δελτίο   Φορολογικής    Νομοθεσίας  , (2000), p. 166    5   decree 186/1992 (Books and Information Code, “ΚΒΣ”) and Article 103 of the law (Νόμος) 2961/2001.   Regarding the VAT secrecy, the VAT Code (Κώδικας Φόρου Προστιθέμενης Αξίας) 24 , in Article 58 provides that any tax information, reports and tax returns that are submitted to the tax authorities are covered by tax secrecy and no third  person can have access to them 25 . However, para. 4 of the same article provides that any more specific laws of income taxation provisions that allow waivers from tax secrecy apply by analogy to the present case. Since the data falling within the scope of tax and bank secrecy are considered to be personal data, Law 2472/1997, which sets out the general legal framework on data protection, can have a supplementary role in cases not covered by the Code for Income Taxation. In accordance with the Constitution, Article 7 of Law Decree 2472/1997  provides that any collection or processing of sensitive data is prohibited 26 . However, paragraph 2 of the same article provides that the collection, processing and even the creation of a file of sensitive data is exceptionally allowed, if followed  by an authorization by the respective authority, HDPA, in a number of cases. One relevant exception is provided in para. Ε, δδ, where it is stipulated that that if the collection and processing of these (even sensitive) data is executed by a public authority and is necessary for the exercise of public tax control or public control of social benefits, is exceptionally allowed. 1.2.3.    Exceptions from tax secrecy [Article 85 of the Code of Income Taxation] Although the protection of tax secrecy is supposed to have an “absolute” character, there are many exceptions set by the Code of Income Taxation (law decree 2238/1994 27 ) for the protection of tax transparency. Article 85 of the Code of Income Taxation is entitled “Tax Secrecy”. Paragraph 1 of the aforementioned article provides that the taxpayers’ tax returns are used only for tax purposes, whilst paragraph 2 provides that “…any data of the taxpayers’ file […as prepared by the tax authorities] that is related to taxation is secret and any notice/notification to anyone else but the taxpayer is forbidden”.  Article 85 para. 4 limits the scope of tax secrecy by stipulating that the information included in the taxpayers’ lists is not covered by tax secrecy, but can be instead provided by the head of the competent DOY upon application of any person who can prove a legitimate interest in accessing this information. According to the 24  Law 2859/2000. 25  Law 2859/2000, Article 58, para. 1. 26  Law Decree 2472/1997, Art. 7 para. 1. 27  The most recent amendments /additions to the Code of Income Taxation with regard to tax secrecy and tax transparency took place in 2011 with the following laws: Article 21 para. 11 of law 3943/2011 (  Α΄  66/31.3.2011) Article 30 para. 3 of the Law 3996/2011 ( ΦΕΚ    Α  170/5.8.2011) and Article 18 para. 8a of the Law 4002/2011 (  Α΄  180/22.8.2011).
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