On October 12, the Administrative Review Tribunal gave judgment on application 32/14 VG as filed by a company to contest the VAT estimates issued by the Director General (Value Added Tax), today the Commissioner for Tax.
The DG (VAT) had estimated VAT dues and ordered the company to pay €15,812.74 in dues, together with a €3,162.55 administrative penalty and interests amounting to €7,527.31, for a total of €26,502.60. This was confirmed by the tribunal.
The aggrieved company put forward two grounds for its appeal to the tribunal. The first one is of interest when it comes to administrative law, that is, the law dealing with the operation of the public administration. In its first ground, the company alleged that the DG (VAT) failed to provide reasons sufficiently motivating his decision.
Turning to the other ground, this dealt with the allegedly erroneous presumptions, assumptions, bases and explanations adopted by the DG (VAT) in coming to his decision on the VAT estimates.
In its review, the tribunal found that the company had been uncooperative with the fiscal authority, especially in providing the required information and responses, while the fiscal authority’s findings tallied with the facts of the case and, in the end, received confirmation by the tribunal.
Numerous requests and meetings or other instances of communications were noted. The tribunal found that it was indeed true that the DG (VAT) had based his decision on numerous presumptions and assumptions, however, the tribunal found that this was rendered necessary and reasonable by the lack of cooperation of the company and the failure of the same to prove its grievances during the administrative process.
The tribunal stressed that those who allege something need to provide sufficient evidence to prove it and it also pointed out that this must be done at the right time during the proceedings. Facts cannot be alleged without proof by way of sufficient evidence filed at evidence stage and such proof cannot be made when submitting legal arguments at the end of the proceedings.
The first grievance by the aggrieved company is of greater legal interest. The tribunal noted that the company was investigated by the Tax Compliance Unit. On November 13, 2013, the DG (VAT) had informed the company that “the enclosed provisional assessments have been raised following proposal from the Tax Compliance Unit. A summary of the proposed assessment is also attached. If you disagree with the attached provisional assessments, you may request a review of the provisional assessments within 30 days from receipt of this letter indicating in Part 1 of the attached notice the specific areas where you disagree and the reason why”.
The company had proceeded to request a review of the provisional estimates. Following this request, the DG (VAT) had sent a further notice dated December 3, 2013, inviting the company to make its arguments and provide proof supporting their disagreement with the provisional estimates raised and explain why it had failed to provide certain crucial information required by the Tax Compliance Unit.
The tribunal found that the company had been uncooperative with the fiscal authority, especially in providing the required information and responses
Reporting on one review meeting, the review officer reported that “during the explanation of the workings of the provisional assessments by the undersigned, Mr Sammut argues that the end result of the increase in sales does not tally with the figures he had in hand. However, when he presented the workings, which, according to him, he had received from the TCU, contrary to what he said, the figures tallied exactly. This confirms the version of the TCU that he was actually informed with the results. Furthermore, an e-mail was provided by the TCU to the undersigned as a proof that the revised workings were actually provided to Mr Sammut via an e-mail dated September 9, 2013. Nevertheless, Mr Sammut did not revert to the TCU with any feedback... No other documents were submitted to support his arguments…”
The DG (VAT) proceeded to inform the company that “with reference to your request for review of the provisional assessments, which are dated November 13, 2013, due to the lack of sufficient and reliable evidence, it was concluded to raise the respective assessments...” and, on March 4, 2014, the director-general of VAT once again confirmed the decision that had been taken.
In adjudicating, the tribunal found it hard to accept the allegation that the decision of the DG (VAT) was not adequately motivated by the reasons given for it and also pointed out that the actual decision was that notified on February 19, 2014 and not the last communication dated March 4, 2014. The tribunal pointed out that the reasons and motivations for the decision were “the lack of sufficient and reliable evidence it was concluded to raise the respective assessments...”.
The tribunal went on to affirmatively quote the decision of the UK House of Lords in the case ‘South Bucks District Council v Porter’ (No. 2) [2004] 1 WLR 1953, in which it was stated that “the reasons for a decision must be intelligible and they must be adequate. They must enable the reader to understand why the matter was decided as it was and what conclusions were reached on the ‘principal important controversial issues’, disclosing how any issue of law or fact was resolved.
“Reasons can be briefly stated, the degree of particularity required depending entirely on the nature of the issues falling for decision. The reasoning must not give rise to a substantial doubt as to whether the decision-maker erred in law, for example, by misunderstanding some relevant policy or some other important matter or by failing to reach a rational decision on relevant grounds. But such adverse inference will not readily be drawn. The reasons need refer only to the main issues in the dispute, not to every material consideration... Decision letters must be read in a straightforward manner, recognising that they are addressed to parties well aware of the issues involved and the arguments advanced.”
This decision of the Administrative Review Tribunal is still subject to an appeal to the Court of Appeal on a point of law.
Edric Micallef Figallo is an associate at Azzopardi, Borg and Associates Advocates.