Government plans to attack tax scofflaws

The Sejm this week is set to consider legislation designed to hunt down tax dodgers while better managing financial support from the European Union and other international institutions. But tax attorneys warn that the measure will open honest companies to prosecution and limit their ability to appeal tax authority decisions. The government tax reform project includes broader, and more final, power for tax inspectors. The legislation would combine tasks of the General Customs Inspector (GIC) and Finance Ministry tax inspectors, widening the range of responsibilities for the latter and providing them with more power in the pursuit of tax scofflaws. The legislation, which is scheduled for review by the Sejm's Public Finance Committee as soon as this week, contains proposals for strict inspection of goods in foreign trade and transit. Inspectors and other entitled persons would have the right to perform routine inspections and to lead preliminary criminal procedures. The project would also create specialized "organizational bodies" within the inspection system, staffed by inspectors allowed to carry guns and use coercive measures. Polish press has labeled them "tiger brigades".

Hunting easy prey The new tax police would be more efficient in executing unpaid liabilities toward the Finance Ministry, according to government officials. Experts say it may become the ultimate judge in taxation cases. Robert Gwiazdowski, an expert on taxes with the Adam Smith Institute, said the easiest targets - companies that want to pay taxes but don't have the money - could be hardest hit by the reforms. "There are two types of tax evasion: either the companies indicate that they should be paying taxes but they don't have the money or they do not indicate income and therefore there is no tax to be paid," he told the WBJ last week. "It is just too easy to hunt down those honest (people that are) willing to cooperate." The whole taxation system, not just inspections, should be reformed, he said. Adding to some companies' woes, they will have limited recourse once they are fingered, experts said. "The Supreme Administrative Court will not allow for appeals because nobody can appeal against evaluation done by a tax institution," said Agata Kozłowska, a tax expert with Warsaw-based law firm Dariusz Tokarczuk i Wspólnicy - Kancelaria Prawna Gide Loyrette. "The only path would be to appeal against procedural errors and that might be unfeasible." But the Finance Ministry said prosecution would be based on impartial calculations. "Figures are unbiased," said Andrzej Bajorek, a ministry adviser. "And calculation is the basis of decisions taken by tax authorities." Discussion in the Sejm on the new legislation should be started this week and, if approved, the government will implement the changes as soon as possible, he said. Even if it is enacted soon, experts remain skeptical about the effects. "This is only a minor face-lift. There is only one method of eliminating transfer prices proceedings and that is lowering taxes," said Gwiazdowski.