Hoofdstuk 8 Summary

The intentional filing of an incorrect tax return constitutes a fact that can lead to both an administrative penalty and a criminal sanction. Since the same fact is, according to the ne bis in idem principle, only punishable once, a choice must be made between administrative liability or criminal prosecution.

The principles of unity of law and equality before the law govern that the decision whether the intentional filing of an incorrect tax return is punishable should not be affected by the case being tried by either the tax court (administrative liability) or the criminal court (criminal prosecution). And yet, when an incorrect tax return turns out to be based on an incorrect yet arguable position, the choice between one road or the other leads in different directions. Since 1984, administrative tax jurisprudence has shown that the presence of an arguable position in a tax return consistently yielded an absence of intent and gross negligence, resulting in impunity. However, the criminal chamber of the Dutch Supreme Court has not acknowledged a role for the arguable position in its cases so far. The criminal courts in first and second instance have not boasted much success for the arguable position defence either.

The aim of this research is to explain this difference in the treatment of the arguable position defence between administrative tax law and criminal tax law, and to offer a suggestion for an unambiguous approach.

When addressing an arguable position defence, actually two questions should be answered. First of all, it has to be decided when a position is arguable. In order to reach this decision, the court must verify whether three objective criteria are met: The position should relate to the interpretation or application of the law that must be interpreted and applied in order to file a tax return (principally tax law). Furthermore, derived from that law, such arguments should be available that it is conceivable that an administrative tax court decides in favour of the position. Finally, the position must be based on established facts and be compatible with the tax return or tax returns that have been filed.

The question when an arguable position leads to the absence of intent is the second question that should be answered when addressing an arguable position defence. In criminal tax jurisprudence this question is answered differently than in administrative tax jurisprudence. The criminal chamber of the Dutch Supreme Court so far has refused to attribute any importance to the presence of an arguable position. Conversely, it has only attached importance to the criteria regularly used to establish whether or not intent is at play (i.e. knowingly and willingly, or knowingly accepting the substantial possibility). However, from an obiter dictum to a judgement delivered by the criminal chamber in 2012, it can be distilled that also in criminal tax law there can be room for a role for the arguable position. When I phrased my suggestion for an unambiguous treatment, I used the leverage created by this dictum.

In administrative tax jurisprudence, the criteria that are commonly applied in order to establish intent are ignored as soon as it has been established that a position is arguable; an arguable position simply always leads to the absence of intent. It is my belief, however, that as of 1 July 2009, with the introduction of the statutory defences in administrative law, this so-called objective effect of the arguable position is no longer compatible with the interpretation of intent. Intent should as in criminal law, be established when the criteria that are commonly applied in order to establish it (i.e. knowingly and willingly, or knowingly accepting the substantial possibility) have been fulfilled, even if the incorrect return is based on an arguable position. Impunity can subsequently still be achieved by applying a statutory defence. However, statutory defences in principle do not remove intent once it has been established; they merely exclude criminal or administrative liability.

When I formulated my suggestion for an unambiguous treatment, the first basic premise was that the interpretation of intent in administrative tax law should be in line with the interpretation of intent in criminal tax law, also when an arguable position is present. A taxpayer who knowingly adopts an arguable position therefore cannot by definition, unlike the current administrative tax jurisprudence has shown, be supposed to have acted without intent. However, he cannot be supposed to have acted with intent at all times either. After all, conditional intent requires a taxpayer to have known that his tax return was possibly incorrect, but also to have accepted that his tax return was incorrect. That acceptance is not a given in the case of an arguable position, since with an arguable position, the chance that a tax return is incorrect at the time it is filed may be substantial, but not so great that the acceptance can be derived from knowing that the arguable position is possibly incorrect and still taking it. Acceptance − and as a result conditional intent − also requires a taxpayer to assume at the time he filed the tax return that his arguable position (and with it his tax return) is incorrect, and that this assumption did not prevent him from taking that position.

As long as the description of the offence has not been satisfied, there is no question of administrative or criminal liability. Both in the case of administrative penalties requiring intent and in the case of criminal sanctions, the arguable position accordingly does not need to play a role until a situation occurs which invariably leads to the establishment of intent. From a strictly legal point of view, it is subsequently possible to deny the arguable position any influence in administrative and criminal tax law, but it is also possible to use the arguable position both in administrative and criminal tax law to time and again result in impunity. The suggestion for an unambiguous treatment of the arguable position defence therefore does not constitute a legal inevitability, but rather forms an elaboration of a number of basic premises that will be discussed below.

Since 1984, the view has been held in administrative tax law that an incorrect return that was based on an arguable position should not be punishable. In the literature, three basic principles taken from tax law can be found to substantiate this view: (1) the acknowledgement that the obligation to file a tax return in the case of ambiguity in the law creates a position that a taxpayer is unwittingly manoeuvred into; (2) a taxpayer’s liberty to submit his own interpretation and application of the law to the tax court; and (3) a taxpayer’s liberty to follow the interpretation and application of the tax law in a way which attracts minimum tax liability. These principles should also in criminal tax law lead to a unique – in the sense that it deviates from general criminal law – view on the punishability of an incorrect yet arguable tax return. As a consequence, the suggestion for an unambiguous treatment of the arguable position defence in both administrative and criminal tax law is based on a second basic premise: not only in administrative tax law, but also in criminal tax law should the presence of an arguable position affect the possibilities to punish a taxpayer for filing an incorrect tax return.

However, the arguable position does not necessarily have to lead to impunity under all circumstances. Instead, the effect of the arguable position on the possibilities to punish a taxpayer should − both in administrative and in criminal tax law − not only be justified by but also be appropriate to its underlying principles. The taxpayer’s liberty to follow his own interpretation and application of the tax law seems to have the most profound influence on punishability. After all, as a consequence of this liberty a taxpayer cannot be held to have sought the boundaries of the law. A taxpayer can, however, be expected to have wanted to stay within the playing field created by this liberty. My interpretation is that he did not necessarily have to assume that his position was correct, but that he at the very least must have assumed that his position was arguable.

Based on the principles just mentioned, an arguable position should only constitute impunity if a taxpayer at the time he filed the return assumed that he was filing a correct tax return or at least assumed that he adopted an arguable position. This is the third basic premise used to phrase the suggestion for unambiguous treatment of the arguable position defence.

In situations where both intent is established − according to the regular criteria − and the return is based on an arguable position, impunity is therefore still desired if the taxpayer at the time he filed the tax return assumed that he was adopting a possibly incorrect, yet arguable position. There are two possibilities to give legal shape to impunity in this situation.

Firstly, it is possible to render a deviating interpretation to the acceptance requirement (one of the requirements for conditional intent) and with it to the interpretation of intent as soon as the return appears to be based on an incorrect but arguable position. In this solution, the taxpayer’s knowledge that his arguable position and therefore his tax return were possibly incorrect, paired with his persistence in taking that position regardless of the consequence, would not be sufficient to meet the acceptance requirement. Instead, acceptance in the case of an arguable position requires the taxpayer at the time of filing the return either to have no position in mind at all, or to fail to assume that his position was arguable. In this solution, intent will in most cases still be lacking, which is in line with current administrative tax jurisprudence. However, that is not always the case. A taxpayer who simply willingly filed an incorrect tax return without having an arguable position in mind (a “deus ex machina” arguable position) or without believing that his position was arguable, did indeed act with intent. The circumstance that the tax return at a later stage transpires to be based on an arguable position (after all), is not relevant.

Secondly, the regular interpretation of the acceptance requirement − and therefore of intent − can be used. The circumstance that the tax return is based on an incorrect, yet arguable position, does not have a special influence on the establishment of intent. Impunity can subsequently, once intent has been established, be reached by means of an unwritten special statutory defence. This statutory defence only applies, however, if the taxpayer actually intended to act permissibly, which means that he, at the moment he filed the return, both must have had the arguable position in mind and must have assumed that the position was arguable. This statutory defence therefore contains both an objective component (i.e. according to objective criteria, an arguable position is present) and a subjective component. This suggestion will more often produce intent in the case of an arguable position compared to current administrative tax jurisprudence, but administrative and criminal liability will in the majority of cases still be averted thanks to the newly suggested statutory defence. However, a taxpayer who simply willingly filed an incorrect tax return without having a position in mind or without believing that the position he took was arguable, did not only act with intent, but will also fail to successfully appeal to the unwritten special statutory defence, owing to the subjective component of the statutory defence.

I do not have a preference for either suggestion, but am content to leave it to the tax and criminal chamber of the Dutch Supreme Court to make a joint decision, presumed they are able to find common ground in the basic premises underlying both suggestions.