“Taxpayer is Right” Index 2013 gives business cause for optimism

“Taxpayer is Right” Index, indicating chances for successful court appeal against Ukrainian tax authorities’ decisions, totalled to 87 in the second half of the last year and 85 as 2013-year average. This means that about 85% of judicial decisions of the cassation instance on cancelation of tax decision notices were taken in favour of the taxpayers.

To calculate the Index about 2.5 thousand judicial decisions are analyzed monthly. Konstantin Pilkov, Cai & Lenard Law Firm’s tax practice’s partner, attorney and one of the Index’s authors, commented the statistics obtained in the process of the Index’s calculation: “Most of the cases on the taxpayers’ claims are decided in their favour in the first instance or appeal courts. Thus,  when claiming against the tax authorities’ illegal decisions taxpayers should focus on a high-quality defence in district courts. In most cases it ensures their win. The tax authorities, not the taxpayers, are dissatisfied with the court decisions more often and file appeals. The corelation between the considered appeals is the following: on average for each taxpayer’s appeal there are 4 tax authorities’ appeals. However, in case the taxpayer had lost a case in the appeal court, the chances to change something in the cassation instance court are very low, slightly more than 1 to 3.

In cases when the Higher Administrative Court of Ukraine didn’t remand a case to the court of the first or appeal instance, the taxpayers’ chances were apportioned as follows: in 38% of cases the court supported taxpayer dissatisfied with the court’s decision, and in 62% - dismissed the taxpayer’s appeal.

The situation was as bad as possible for the tax authorities. According to the research results, in the second half of 2013 in case the taxpayer was satisfied with the court of appeals decision, but the  tax authority wasn’t, the tax authorities’ chances were the following: the cassation instance court refused to satisfy the appeal  in more than 97% of cases, and allowed the appeal only in 3% of cases. In November and October there were a few cases in which the tax authorities’ appeals only made things worse. The lower courts sustained the taxpayers’ claims in part and the taxpayers were satisfied with it, and in response to the tax authorities’ appeals the Higher Administrative Court of Ukraine reversed those decisions and... sustained the claims in full. It is only fair to add that this fate befell one taxpayer in August”.

With a dose of irony Mr. Pilkov mentioned that the state-owned and municipal enterprises, military units and... correctional camps show bad results in courts. They lose in disputes with tax authorities more often than others. “I don’t think the reason is the tax authorities’ intention to fund budget from the budget funds. It’s just that this category of the taxpayers is often deprived of the opportunity to defend itself in court appropriately,” – the lawyer noted.