The tax authorities cannot carry out a search without a duly justified reason

The Chamber annuls a court order authorizing the request of the Inland Revenue to enter the domicile of a company based on the fact that it had paid taxes below the average for the sector, which suggested that it might have been concealing effective sales

The Second Section of the Contentious Administrative Chamber of the Supreme Court has annulled, due to defects in motivation, a court order that authorized the request of the Treasury Department to enter the domicile of a company based on the fact that it had paid taxes below the average of the sector, which led to think that it could have been hiding effective sales.

The Chamber states that "the Administration's hunch or presentiment that, by taxing a taxpayer below the sector average, it makes him incur in a kind of iuris et de iure presumption of tax fraud, is a fact that in itself is not enough, not even to establish a causal relationship or scheme that leads to that fraud -not even in the presumption of unfulfilled duties, which must be clarified through the corresponding procedure, with subsequent judicial control, and even less to anchor in such circumstances the need to enter the home for the comparison of data that support or deny the suspicion harbored by the Administration".

He adds that when the suspicion is based on a source of science "so evanescent and lax, of such an arcane origin, with a statistical or comparative basis that has not been contrasted nor, as far as is known, published, it must be firmly established, at least, as a starting point, what are the criteria that lead the administration to cling to that categorical conclusion, if one takes into account that the deviation from the average may reach different levels of intensity and not suppose, with such isolated data, any presumption of fraud".

The court underscores that "the domicile defined in Article 18.2 of the Spanish Constitution cannot be accessed for a merely prospective or undetermined purpose, just in case, since the fundamental nature of the right that the Constitution protects and exceptionally allows for sacrifice or exclusion, must be in the presence of a constitutionally protected good -and the duty to contribute in Article 31.1 of the Constitution is one of them, expressed in general terms.

However, according to the ruling, "the comparison of the hypothetical situation, suspected or derived from a merely fragmentary information, born from the projection of generic data in documents or statistical tables and whose reliability, in the absence of more solid elements of conviction, we must necessarily question, is not sufficient basis to serve as a qualification for the Administration - to request - and the judge - to grant - the entry into the home.

There is no authorization "to see what is found"

The ruling establishes the requirements that must be met by both the application for entry and registration at the domicile or registered office of a company, made by the Tax Office, and the court order authorizing it.

"According to the ruling, there is no room for authorization of entry for prospective, statistical or indefinite purposes, "to see what is found", for the finding of data that are ignored, without identifying precisely what specific information is intended to be obtained, so that entries are not made to find out what the person being checked has".

Likewise, the authorization of entry must be connected to the existence of an inspection procedure that has already been opened and whose beginning has been notified to the inspected party, with an indication of the taxes and periods that affect the investigations, as required by Articles 113 and 142 of the General Tax Law (LGT). It adds that "without the existence of such prior act, which must be accompanied by the request, the judge may not adopt any measure regarding the entry into the constitutionally protected domicile for the purpose of conducting tax investigations, due to lack of competence".

He adds that the possibility of adopting the unheard of entry authorization refers to the eventuality of not announcing the entry diligence prior to its practice. "Such situation, which is strictly exceptional, must be expressly based on its necessity in the specific case, both in the request of the Administration and, with greater obligation, in the judicial order, without it being possible to presume, in the mere verification, an unconditional or natural right to enter the domicile", the Chamber stresses.

With respect to the court order, it reasons that "it is necessary that it motivates and justifies -that is, formally and materially- the need, adequacy and proportionality of the entry measure, subjecting the information provided by the Administration to contrast, which must be questioned, in its appearance and credibility, without automatic, unfounded or uncritical acceptance of the data offered. Only one authorization per car is admissible after the comparative analysis of such requirements, one by one".

In order to authorize the entry - the Chamber states - general or indefinite data or information from statistics, calculations or, in general, from the comparison of the supposed situation of the holder of the domicile with that of other undetermined taxpayers or groups of these, or with the average of sectors of activity in the whole national territory, without any specification or detailed segmentation that guarantees the seriousness of such sources, cannot serve as a basis.

"Such analysis -according to the judgment- if it is made exceptionally, it must take into account all the concurrent circumstances and, very particularly, that from such indications, vestiges or general and relative data -verified its origin, seriousness and the specific situation of the interested party with respect to them- the entry is strictly necessary, which requires assessing the existence of other circumstantial factors and, in particular, the previous conduct of the holder in response to actions or information requests made by the Administration".