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New High Court ruling will force the Spanish Tax Authorities to be better behaved

Spanish Supreme Court (Tribunal Supremo) in Madrid

Last week, the Spanish High Courts  passed judgement on a case preventing the Spanish Tax Authorities (Hacienda Pública) from taking action against people and companies before any ruling has been handed down, in cases where an appeal has been filed.

Previous to this judgement (number 586/2020), handed down on May 28th, Hacienda used to start the execution process against people deemed debtors by Hacienda, even if court proceedings were still ongoing to establish if the Tax Authorities were right or not.

The only way to stop them grabbing your assets before a court ruling in their favour was to apply for a stay of execution at the time of lodging an appeal; in other words, if you didn’t want your assets to be seized by the Spanish Tax Authorities, you had to ask them not to seize them in advance. But this meant Hacienda would be violating a important constitutional right, as per the Spanish Constitution (article 24).

The reason Hacienda could get away with this sneaky trick is because of a Spanish practise known as Silencio Administrativo, or  ‘Administrative Silence’, which denotes a public authority’s failure to respond to a request, petition or appeal, resulting in a passive decision in itself: positive or negative.

The original intention of Silencio Administrativo was to prevent things from collapsing into stagnation on account of inaction by some level of the public administration. However, it seems that Hacienda has been considering this “no ruling” as a “go-ahead” for debt execution.

So, for example, if hacienda thought you owed them money for undeclared rental income, before this ruling, they would go ahead and pursue you on the  basis of Administrative Silence, without waiting for a firm judgement of any appeals process.

Now, however, potential debtors can breathe a sigh of relief, because it has been decided that Hacienda cannot act against them until a final ruling is on the table. In cases where they have the right to appeal, they are now entitled to a firm ruling on appeal before Hacienda can start  handing out fines, and seizing assets. So, from now on, potential debtors must considered innocent until found guilty, as stated in the above-mentioned article 24 of the Spanish Constitution. And, to my knowledge, no penalty is allowed to be imposed on innocent individuals.

We are not in the XIX century anymore, where authoritarian governments prevailed in an attempt to guarantee a strong Administration in the middle of civil wars. Back then, Public Administration was responsible for raising as much money as possible. This needs to change, and this recent ruling in the Spanish High Court will help.

In this sense, this ruling has emphasised the fact that Hacienda should not put the cart before the horse by imposing a penalty just in case a penalty was eventually required. That would entail a presumption of guilt, and technically speaking, even an alteration of the burden of proof. Just like when it comes to traffic penalties in Spain, where if one decides to go to a trial, one immediately loses the opportunity to pay only half the fine. It would thus appear that discounts are for people who have nothing to complain about.

In fact, the idea of the Spanish Tax Authorities executing debts before they finish the ongoing proceedings, or without even hearing what debtors have to say about, seems rather rude to me. This ruling will help, but what the Spanish Hacienda Pública also needs is a lesson in good manners.

Marta Sánchez is a Spanish legal consultant at Del Canto Chambers in London

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