Offense penalty wrongfully reduced due to violation of procedural rules
The Supreme Court rules that the court of appeal has failed to first determine whether the taxpayer was harmed at all because of the late date on which the offense penalty was announced.
12 july 2017
Right to a fair trial
Article 6 of the European Convention for the Human Rights (ECHR) sets out the right to a fair trial. As early as some decades ago, the Supreme Court ruled that the guarantees offered in this provision not only apply when criminal proceedings are instituted against someone, but also when an administrative penalty is imposed.
One of the guarantees provided for in article 6 ECHR is for someone to be informed “promptly” of the nature and cause of the accusation against him. Under tax penalty law this provision has been “translated” such that the taxpayer must be informed about the facts that have caused imposition of a penalty at the latest at the same time that a penalty is imposed. What’s more, if it regards an offense penalty the inspector must provide grounds as to why this would constitute wilful misconduct or gross negligence. If this essential regulation is violated the imposed penalty must be cancelled.
Distinction between default and offense penalty
Recently, the question arose as to whether the court should also attach consequences to the fact that an interested party had not been given the opportunity to state his view on an offense penalty prior to this being imposed.
The case regarded a taxpayer who was informed about an income tax/national insurance contributions assessment for the year 2010, during a meeting with the inspector on 23 July 2013. An offense penalty was imposed at the same time. On appeal, the taxpayer complained that he had been given insufficient opportunity to respond to the intention to impose a penalty. The Court of Appeal in The Hague ruled that the procedure followed by the inspector was not permitted. It reduced the imposed penalty by 40 per cent.
The State Secretary successfully appealed this judgment. The Supreme Court ruled that the penalty could solely be reduced if it is established that the taxpayer is harmed by the course of affairs. Earlier case law shows this not to be the case if in the objection phase a taxpayer has as yet had the opportunity to state his objections against the penalty and this has not led to the penalty amount being reduced. In this case the court of appeal has failed to state anything about possible harm, so in this respect the grounds for the judgment were insufficient. The case is referred to the Court of Appeal in Amsterdam for further hearing and decision.
Source: HR 30 June 2017, 16/00502, ECLI:NL:HR:2017:1178