Italian context
The case involved tax visits to 13 companies by the Italian tax administration. During these visits, various documents and data were copied and seized, including accounting records (required to be kept) and other documents (not required to be kept). The companies concerned argued that Italian legislation did not provide sufficient guarantees against possible abuse and arbitrariness on the part of the tax administration.
Italian legislation provides that tax officials have the right to search business premises, examine documents present and copy or take them away. The officials must have a special administrative authorisation specifying the purpose of the visit. For private residences, this authorisation must be issued by the public prosecutor's office. If the taxpayer does not cooperate, administrative sanctions or an ex officio tax procedure may apply. In addition, the legislation stipulates that the administration must conduct the visitation in a manner that minimises the disruption to the taxpayer's business and professional relations.
ECHR judgment: legislation must provide concrete and objective criteria for interference
The ECHR recognises that there is an interference with taxpayers' rights under Article 8 of the European Convention on Human Rights, as business premises are also covered by the protection of this article. Although a tax raid is not a criminal search of premises, it must still be justified. In particular, the tax raid must meet the conditions of necessity, proportionality and legitimacy.
The ECHR finds that Italian law does not place sufficient limits on the discretionary powers of the tax authorities. In particular, the ECHR points to:
- The absence of an obligation for the tax authority to specifically justify why a tax raid is necessary. The law does not require the tax authority to explain specifically why the audit is being carried out and on the basis of what objective and concrete criteria;
- The fact that the legislation does not provide adequate delineation of the scope and purpose of the investigation. The law does not require the tax authorities to explain specifically why certain information is being requested. Nor must the tax authority explain the proportionality between the information requested and the purpose of the investigation. In this case, the tax authorities requested a lot of information from taxpayers, substantially more than was necessary for the determination of tax;
- The ambiguity of processing tax irrelevant or confidential documents. The legislation only provides for professional secrecy for tax officials. However, there is no provision for an effective procedural protection mechanism for the taxpayer;
- The lack of effective ex ante and ex post judicial control over the visitations. Only in cases where an authorisation did not exist could taxpayers effectively defend themselves against tax assessments. This, the ECHR found, violates the required legal protection under the European Convention.
Consequently, the ECHR finds that the Italian legislation does not fulfil the "quality of law" condition based on Article 8 of the European Convention. Indeed, the "scope of discretion" for the tax authority is not sufficiently delimited. Put differently, the Italian tax authority has unlimited discretion in determining the scope and nature of investigative measures. Italian law provides no obligation to justify the measures on their necessity and proportionality.
There has therefore been a violation of Article 8 of the European Convention.
Implications for Belgian tax practice
If a taxpayer refuses to grant free access to the tax administration, then administrative fines can be imposed or the administration can claim a penalty payment through the intervention of a tax court, sitting as in summary proceedings.
Although an ex officio taxation procedure is not part of the Belgian tax authorities' arsenal (as in Italy), the coalition agreement of 31 January 2025 mentions a similar possibility. When a taxpayer "intentionally" obstructs a tax raid, the tax authorities will henceforth be able to assess a minimum taxable profit as provided for in article 342, §1 BITC92. This taxation option would replace the penalty regime. The minimum taxable profit can be used as a unilateral means of pressure by the tax authorities (without judicial intervention). There is no immediate judicial remedy against this; indeed, one must first exhaust a time-consuming administrative appeal phase while, in the meantime, protective measures can be taken to safeguard the recovery of the contested assessment. The question arises whether this new measure, in which no (immediate) judicial intervention seems to be foreseen, will meet the criteria of the ECHR. After all, the ECHR states that effective judicial review or remedy within a reasonable time is crucial.
Belgian jurisprudence did accept the concept of 'pre-taxation disputes'. Pretaxation disputes are challenges before the court before a tax assessment is established. In Belgium, the taxpayer always has the right to challenge investigation measures in court, e.g. because of the tax irrelevant or disproportionate nature of a measure. Judicial review must be effective; i.e. the judge cannot limit himself to a mere formal check on the fulfilment of the legal conditions (e.g. was the required authorisation given?). The judge must effectively review the necessity and proportionality of investigative measures according to the ECHR.
In practice, the Belgian administration also does not explain why a tax raid is carried out, why this visitation would be necessary and why the copy taking/seizure of documents or information would be proportionate. In general, the administration takes a full copy of entire servers/laptops/computers without concretely explaining why a full copy would be proportionate. Such practices do not seem compatible with the aforementioned ECHR case-law.
Conclusion
The ECHR stresses that there must be clear legal limits to the tax authorities' powers of investigation and that taxpayers must be given the opportunity to defend themselves within a reasonable period of time. In other words, the tax administration should be transparent about the reasons for a tax raid and should provide sufficient justification. If the tax authority requests, copies or seizes information, it must give concrete reasons as to why this information is necessary and proportionate in relation to the purpose of the tax audit. The tax authorities should not have a blank cheque, indiscriminately copying or seizing (any and all) information.
In addition, effective judicial control, both ex-ante and ex-post, is essential to protect taxpayers from disproportionate measures.
If you would like advice on your rights and/or assistance with audits by the tax authorities, you can always contact our specialised litigation team.
