The revival of extinguished tax debts and the principle of good administration

Of late, the Spanish Supreme Court is increasingly resorting to principles when adjudicating on the actions of the tax authorities. One of the principles that has gained particular prominence is the right to good administration, perhaps because of its figurehead role in the practices of the tax authorities. According to this principle, enshrined in the Charter of Fundamental Rights of the European Union and, albeit with different wording, the Spanish Constitution, the authorities must serve the general interest objectively and act in accordance with the principles of efficiency, hierarchy, decentralisation, deconcentration and coordination, at all times complying with the law. As the Spanish Supreme Court has recalled, the principle of good administration “does not stop at mere strict observance of procedures and formalities, but goes beyond that to demand the full effectiveness of the taxpayer’s legally and constitutionally recognised guarantees and rights”. Not a big ask!

The question arises of whether this principle – and others such as the principle of legality, proportionality or legitimate expectation – is respected when a tax authority seeks payment from a jointly and severally liable person (“A”) of a tax debt that is “revived” following a successful appeal lodged by another jointly and severally liable person (“B”) who had previously paid – and therefore extinguished – the debt for the benefit of all the other jointly and severally liable parties. The tax authorities considered that, as A had not suspended the debt when it lodged its own appeal (since the precautionary measures were shelved when the debt was extinguished by B’s payment), it should be revived directly in enforcement proceedings. All this despite that fact that, during the period when the debt was extinguished, A obtained certificates issued by the tax authorities stating that it was up to date with its tax obligations.

There can be little doubt that this in no way contributes to giving full effect to the taxpayer’s guarantees and rights as required by the principle of good administration. Where we do have doubts is whether on this occasion this principle was even considered in the first place.