“Taxpayer is Right” Index in the first half of 2014: taxmen lose 89% of cases
“Taxpayer is Right” Index that is calculated in Ukraine indicates in whose favour the judicial decisions were taken in case a taxpayer had claimed against the tax authorities’ decision-notices. In the first half of the present year the Index totalled to 88.73%.
The Index is stably high for the second year in a row and even increased by 8% in comparison with the first half of 2013.
The mark “50” in the Index shows a balance point at which taxpayers and tax authorities have fifty-fifty chances to win the case. The Index exceeding 50 means that the odds are in favour of taxpayers. If the Index reaches 100 it will mean that the tax authorities’ decisions fail examination in court. The Index’s fall to zero would mean that taxpayers have no chance in legal proceedings against tax authorities.
At the same time, as the Index's authors note, its stably high rate while the number of tax disputes increases demonstrates that the tax authorities’ executives don’t take mistakes into consideration and make them again even after numerous disprovings of their position in court. If the Index had decreased together with the number of disputes’ reduction, this would mean that the tax authorities’ decisions became more reasoned and taxpayers recognize them to be such.
As it follows from the data obtained in the process of the Index calculation, each illegal tax decision notice entails not only taxpayers’ time and money expenditure for its claiming, but also “floods out” the court system with tax authorities’ baseless appeals. The reason is that the tax authorities are exempted from court fee and claim against court decisions in all instances “free”. Thus, for each failed taxpayers’ cassation appeal there are more than 10 of the tax authorities’, what means that the tax authorities flood out the Higher Administrative Court of Ukraine with their baseless appeals ten times more than taxpayers.
Konstantin Pilkov, partner of Cai & Lenard Law Firm tax practice, analysts of which calculated the Index, commented the research: “We are happy to help taxpayers to assess their chances for successful appeal against the tax authorities’ illegal decisions. Our calculations are based on the analyses of thousands of judicial decisions. The results dispel a myth of hopelessness of any disputes with taxmen and also demolish a view that the courts in Ukraine don’t “bite” the tax authorities’ “hand that feeds them”. On the contrary, they bite it in 89% of cases if a taxpayer’s claim was filled in accordance with the highest standards and properly represented in court. The latter condition is not always satisfied by state-owned and municipal enterprises as well as private entrepreneurs that lose disputes more often than others. Sometimes other governmental authorities acting as taxpayers lose in disputes with tax authorities. For example, the Index statistics of February was “spoiled” by the cases that were lost by the Security Service of Ukraine (SSU). The taxmen fined the SSU for delay of the land fees payment, and the SSU as a taxpayer lost in all judicial instances. Thus, Ukrainian courts not only “bite” the tax authorities’ “hand that feeds them”, but also “punch” the security bodies’ “lidless eye”. This demonstration of courts’ independence is encouraging and gives us a ground to hope that one day it will be established in other spheres and in all system of justice.”