New taxes or rules affecting tax liability cannot be imposed by instructions and administrative documents of the Tax and Customs Board, as in a country of the rule of law they must come exclusively from the legislator, the Estonian Bar Association said in an opinion sent to the Tax and Customs Board.
“The tax administration is working on a set of guidelines that may introduce taxation on transactions and activities that have not been taxed so far. This would significantly change the practice of corporate acquisitions and the corresponding sector,” said attorney-at-law Villy Lopman, chair of the Bar Association’s tax law committee. “Tax laws can only be changed by the legislator, not by the executive with a set of guidelines.”
Lopman explained that while explanatory guidance concerning the current income tax law is definitely necessary, its purpose can only be to help the law-abiding taxpayer, not to covertly create new tax rules.
“Under no circumstances should sets of guidelines be seen as a cunning opportunity to create new tax rules while avoiding the legislature,” he said. “New legislation must begin with the formulation of the will of the legislature, go through the usual democratic procedure in parliament and include impact analyses.”
The proposed guideline would significantly change the taxation of leveraged acquisitions. The current law does not tax such transactions, but the guideline proposed by the tax and customs authority is based on the opposite assumption, suggesting that such transactions can be taxable in certain cases.
The Estonian Bar Association considers it particularly problematic that the proposed guideline does not explicitly exclude the retroactive establishment of new rules. According to Lopman, the guideline should not, under any circumstances, increase confusion through retroactive application.
At the same time, the Bar Association acknowledges the Tax and Customs Board for its efforts in preparing the guideline and for involving the Bar Association in the preparation of the guideline.
“If new rules are needed, they must be established by the legislature, which will also take political responsibility. The Bar Association brings together over a thousand top legal professionals and we are certainly ready to contribute to the creation of a high-quality legal environment,” the association added.
Source: BNS
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