Tax authorities’ obligation to guide and assist taxpayers in the light of the Ministry of Finance Order no. 1233/2021

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This article was prepared for and first appeared in Which Lawyer in Romania 2021

Author: Marius Ezer

The transparency of the relationship between the National Tax Administration Agency (Agenția Națională de Administrare Fiscală or short „ANAF”) and taxpayers and the effective exercise of a guidance role are essential elements to prevent non-compliance. At the same time, this might increase voluntary compliance of taxpayers which has seen a welcome development following the adoption in October 2021, by Order of the Ministry of Finance No. 1.233/2021, of the Procedure for guidance and assistance to taxpayers/payers, granted by ANAF, and for methodological coordination of the activity of unitary application of tax and tax procedural legislation.

In European Union countries with a high degree of compliance and tax collection, tax authorities issue interpretation guides with clear examples of the interpretation and practical application of tax law in various industries. The link between the guidance provided by the tax authority and taxpayer compliance is undeniable.

In Romania, there are a number of dysfunctions in the procedure of guidance and assistance to taxpayers, which oftentimes have led to a lack of uniform and transparent positions at the level of ANAF on tax solutions applicable to certain situations in economic activity, with the consequence of generating tax imbalances and situations of unfair competition by applying different tax treatments for similar situations.

Despite the adoption of this procedure, there are still issues that should be addressed by the legislator in order to transform this procedure into an effective and useful tool to guide and assist taxpayers/payers.

Thus, at least the following technical considerations should be taken into account in order to establish an effective mechanism for guiding and reconciling taxpayers:

Clarification of the distinction between the provision of information of a general nature (under the procedure established by Order of the Ministry of Finance No 1.233/2021) and the regulation of future factual tax situations (under Article 52 of the Tax Procedure Code and Order No 3736/2015 on the issuance of the anticipated individual tax solution). 

In practice, tax authorities have issued responses to taxpayers’ requests for guidance and assistance in which they have determined, on a discretionary basis, that the answers to taxpayers’ questions would, due to the complexity of the cases, fall within the scope of the advance individual tax solution and would not be eligible for guidance and assistance in the absence of an application for an advance individual tax solution.  As the legislation does not distinguish between complex and less complex situations, but in the regulation of the advance individual tax solution refers only to the regulation of a future factual tax situation, if it is intended that only the institution of the advance individual tax solution should be used to determine the tax treatment applicable to any future transactions/operations, while the procedure provided for in the Order of the Ministry of Public Finance No 1233/2021 should be accessible only for the clarification of the treatment applicable to past or current transactions/operations, this should be specified in the legislation.  Alternatively, and preferably in our view, it would be that the guidance and assistance procedure established by the Order of the Ministry of Finance No. 1233/2021 should clearly state that the bodies responsible for providing assistance and guidance will provide answers/opinions on how taxpayers should proceed in order to benefit from a tax right or to comply with a tax obligation regardless of whether the request relates to transactions already carried out or to future transactions, and especially regardless of the apparent complexity of the case.

Eliminate the restriction of the right of taxpayers to receive guidance and assistance from specialised bodies (i) during the period when the taxpayer is subject to tax control, (ii) in relation to the resolution of issues which are the subject of appeals against tax administrative acts and (iii) in relation to the resolution of issues which are the subject of litigation before the courts or on which criminal or disciplinary investigations are being carried out.  We fully understand the need to ensure unified solutions, but we consider that it would be beneficial to establish the possibility of the DGAC expressing opinions, with the support of specialists from the Directorate of Legislation of the Ministry of Finance, as a coordinating body for assistance and guidance during the above-mentioned procedures. This is because the opinion of the tax authorities could lead to the prevention of a potential dispute (if given during the tax inspection) or even to the direct termination, before completion, of an administrative or judicial procedure (if given at the stage of a tax dispute or tax litigation). The tax body providing the answer to the interpretation issue in another tax administration procedure or even in the court ruling in the administrative dispute cannot be in a different position from the one managing the latter procedures, which in turn cannot aim at anything other than the correct interpretation and application of the tax law. However, it cannot be said that if such an opinion expressed by the body providing assistance and guidance to taxpayers were contrary to that previously expressed in the inspection or even in litigation, it would in any way prejudice the principles applicable to the conduct of those proceedings, since the interest and aims pursued in those proceedings cannot be other than the correct application of the tax law, and not the preservation at all costs of an opinion (possibly even wrong or inaccurate) initially expressed by any other tax body.

Moreover, the provisions of the tax procedural law allow the tax authorities to request the opinion of the specialist departments of the Ministry of Public Finance or the ANAF during the tax inspection or during the resolution of the tax appeal, precisely in order to clarify the case, thus creating an unfounded imbalance between the rights of the tax authorities and those available to the taxpayer, who is restricted access to the clarification of the case. The taxpayer then ends up having to bear the subsequent costs of the steps he has to take to clarify and resolve his situation, instead of having the opportunity, like the tax authorities, to clarify it well in advance.

Clarification of the legal status of tax authorities’ opinions granted following taxpayers’ requests for guidance versus those granted to tax authorities at the request of the latter. More specifically, a distinction should be made between the two categories of opinions, in the sense that only those obtained at the request of taxpayers are subject to the provisions of Article 6 of the Tax Procedure Code, and they take precedence over those obtained at the request of the tax authorities, if the latter are contrary to or offer a different interpretation from that offered at the request of taxpayers. In practice, there have been situations where, after obtaining an opinion from a taxpayer, the tax authorities have requested another opinion from the Ministry of Finance, which turned out to be contrary and which was applied in priority by the tax authorities in order to determine the correct tax treatment. However, under no circumstances can the latter be opposed by the tax authorities to the taxpayer, so they should be regulated separately to avoid the risk of confusion.

Moreover, we have identified numerous situations where, although the taxpayer had diligently obtained such an opinion in advance in the context of guidance and assistance, and on the basis of which he defined the tax treatment applicable to certain transactions, the tax authorities subsequently contradicted that opinion during tax audits and applied a different tax treatment, even though the transactions concerned by the opinion were the same.

In this context, we believe that the new legislative framework for taxpayer guidance and assistance should provide clear safeguards to ensure the uniform, consistent nature of the solutions adopted by tax authorities in exercising their right of assessment, given that the current text of Article 6 of the Code of Tax Procedure, which refers to the generic requirement that the tax authority “shall take into account the opinion issued in writing by the competent tax authority to the taxpayer concerned”, has too often proved ineffective in practice.

Operationalization and updating of a database with addresses issued by the bodies with competence in guidance and assistance, organized by types of taxes/charges, types of cases, industries, etc., of course with anonymization of taxpayer data and amounts.  Such a database would be of immense help to taxpayers and would also help to free up the structures involved in providing guidance and assistance as taxpayers could already identify the answer to certain cases within this database.  Such a database would also contribute to uniform tax treatment. For reasons of efficiency and transparency of tax administration, we consider it useful to regulate that, if taxpayers invoke such opinions, tax authorities should be obliged to state in tax administrative acts the reasons for the factual and legal circumstances that make them inapplicable to the taxpayer subject to tax control action or who has a tax dispute with tax authorities, even if those opinions were not issued for other taxpayers.

As part of the guidance and assistance provided ex officio through guides and other information materials, it would be beneficial to provide interpretations and explanations with clear examples from various industries, and to update them according to the types of transactions/operations identified in economic activity. Not infrequently, the guides published on the ANAF website merely reiterate the legal provisions, as for certain cases or situations the legal provisions are insufficient to determine with certainty the applicable tax treatment, the role of the guide being precisely to provide a means of interpreting the legislation and not just a reiteration of it.  A model to consider would be the way in which guidance is provided by the UK tax authorities (HMRC), who are constantly producing guidance and guidance material for different situations identified in business activity.

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