Tax Arbitration in European Union

Objectives of the project and research:

The issue of tax dispute resolution is of key importance for the tax system, therefore the state should strive to ensure that tax disputes that arise are resolved quickly, objectively and at the lowest possible fiscal cost to the state budget. Lengthy court processes do not serve to deepen the trust of citizens in the state, and put into question the effective functioning of the justice system. Moreover, the activities of public administration based on principles such as unilateralism, rulership and subordination in modern societies are ineffective. Therefore, an extremely important element in ensuring adequate access to justice for citizens is the state’s acquiescence to the existence of amicable methods of dispute resolution. Particularly with regard to the settlement of tax disputes by means of the aforementioned methods.

The delegation of states’ powers to resolve tax disputes to institutions offering amicable dispute resolution may be controversial. However, such arrangements are already implemented in a number of countries. The introduction of tax arbitration in Portugal is an example of how alternative dispute resolution results in the streamlining of the justice system.

Research panel in this project examine and explain the institution of tax arbitration as well as the resolution of tax disputes through mediation and broader through alternative dispute resolution methods using comparative methodology based on legislative, doctrine and case law in Portugal, Ireland, Finland, Spain as well as in the United Kingdom. In these selected jurisdictions amicable tax disputes resolution system have been established. The research panel will also investigate the legitimacy of tax arbitration and other amicable tax dispute resolution methods under the primary and secondary law of the European Union.

The possibility of resolving tax disputes through arbitration between investors and states under investment treaties will also be analysed.

The research panel will also analyse Polish civil procedure and administrative law in the context of the possibility of functioning of tax arbitration in the domestic legal system. The result of the research in this regard will be the development of de lege ferenda comments concerning the creation of a Polish model of tax arbitration. This project will also examine the macroeconomic conditions for the introduction of tax arbitration in the Polish legal system.

The project will also present tax arbitration in the context of the concept of civil society. The concept of social control over the tax dispute resolution system will also be considered.

The importance of the research for the national legal system

In the Polish academic debate, so far, there is a lack of discourse on the possibility of resolving tax disputes by specialised arbitration courts. Therefore, this research project will be the first study on this topic to provide a comparative legal analysis of the functioning of tax arbitration in countries of the European circle, as well as the Polish perspective on the introduction of the institution of tax arbitration within the framework of the existing regulations of administrative law and the Code of Civil Procedure. Importantly, in this context, the norms of primary and secondary law of the European Union will also be examined.

Tax arbitration seems to be a solution to the systemic problems of administrative proceedings on appeals against decisions of tax authorities, such as the lack of trust of citizens in the administrative court system, the lengthiness of court proceedings, and is a response to the need to adapt the tax system to the challenges posed by rapidly changing social realities, thus implementing the postulate of responsive law. In view of the importance of the matter of resolving legal and tax disputes for the entire legal system of the state, it is logical that such disputes could be resolved by institutional arbitration and not by ad hoc arbitration.

Crucially, tax arbitration can be an effective tool to turn demands for the need for social control over the tax system into reality. The research carried out under the project will contribute to revitalising the academic debate as well as the social debate about the need to introduce into the Polish legal system a mechanism for the out-of-court settlement of tax disputes by independent arbitration tribunals consisting of highly-regarded specialists in tax law. Research in this matter will also contribute to the formation of civil society attitudes in Poland, as tax arbitration would realise the idea of a society independent of state institutions, in this case administrative courts.