The Rights and responsibilities of taxpayers India include the protection of personal privacy, property confidentiality and penalties that keeps taxpayers safe from the misuse of power by the authorities.
Know what are the Fundamental Rights of Taxpayers in India
(a) Right to Legal Certainty
The right to legal certainty limits the power of tax authorities by safeguarding individual taxpayer from abusive or arbitrary actions. Moreover, this right helps a taxpayer to predict his tax liabilities and obligations while entitling him to assume that these rights cannot be changed arbitrarily.
The Rights of Taxpayers in India, primarily protects the taxpayer against coercive measures, breach of confidentiality and gives the right of appeal. It also respects the finality of legal judgments and the time limits for legal and administration actions.
The principle of legality entitles citizens to peaceful enjoyment of their possessions, except as provided by law. Every act concerning taxation must have legislative approval so there should be no taxation except under the authority of law. Legal certainty guarantees that taxes are imposed only if allowed by law and the taxpayers only pay the taxes required by law.
Some countries follow the universal principle of legal certainty that the tax authorities cannot negotiate or decrease the tax liability of the taxpayer and it should be equally implemented on all. Some other countries do permit it (Example: Plea bargaining in the United States).
(b) Right to the Principle of Non-retroactivity (Non-retrospective Effect)
It denies many states the freedom to make retroactive changes in the law. The rights of taxpayers in India include the tax consequences of his economic decisions. Thus, any subsequent tax change with the retroactive effect is unfair and affects his rights.
Many countries do not allow legal changes with retroactive effect under their constitution or civilian law. Germany, Mexico, Paraguay, Russia, Slovenia, Sweden, and Venezuela, while those who permit them are Australia, France, India, and the United States, although there are exceptions to the permissions.
In France, retrospective legislation cannot be penal or affect cases already decided by the Courts. The US Constitution prohibits retrospective criminal legislation. In comparison, Germany allows retrospective tax legislation in cases where the existing legal position of the taxpayer is unreasonable, or the law is unclear, technically inadequate or it is overriding public need.
Various countries treat this principle not as a binding policy but as a principle for the government to follow. Generally, it closes tax loopholes and makes “technical corrections”. ‘European Court of Human Rights’ considers it in several cases.
In each case, it has held that the legislation was consistent with the guarantees provided in Article 1 on Protection of Property. Retroactive criminal legislation doesn’t allow offence creation or criminal sanction’s increase.
(c) Right to the Principle of Equality and Taxpaying Capacity
Right to the principle of equality states that Tax law should be applied equally and impartially irrespective of the status of the person involved without any exceptions.
Additionally, equality does not mean identical but equality among persons who are in the same position. They must be equal from a legal and factual aspect as well as having the equivalent taxpaying potential.
This principle legitimizes taxation by the government as against the citizen’s duty to finance government expenditure. However, it also restricts the government’s tax-creating powers where there is no present, genuine or effective taxpaying potential. Taxes must not be confiscatory.
A tax is confiscatory if it takes up a substantial or unreasonable portion of the income of the taxpayer. Also, it must be based on proportionality or the real economic capacity or ability to pay.
(d) Right to Due Process and Procedure and Adequate Judicial Review
Taxpayers’ rights may be substantive or procedural. The previous relates to the efficacy, operation, and application of the tax law itself. It provides for protection from discrimination, excessive taxation, and retroactive legislation.
It deals with legislative and administrative measures, collection of taxes and enforcement issues. Authorities have to keep taxpayers’ data confidential.
The declaration is a crime in many countries for transfer pricing. The judicial request has the power to exchange or disclose information, or under a specific agreement (e.g. tax information exchange agreement or TIEA).
A taxpayer has the right to a defence in a Court of law as well as in administrative proceedings on tax matters. This right includes access to the Courts, as well as the right to be heard; the right to offer and present evidence; and the right to a duly substantiated decision. Generally, these rights do not need regulatory provisions.
(e) Some Other Rights
According to the 1994 OECD Report, taxpayers’ rights also include the rights on the exchange of tax information, such as:
- Right to be informed or notified (of an information request and on its subsequent activities (notification);
- Right to participate in the process of acquiring information (consultation), and
iii. Right to appeal and regulate the authority of the request (intervention).
These rights under domestic law are also subject to International Conventions on Human Rights in many countries.
Taxpayers’ Rights under International Conventions on Human Rights
Many International conventions make sure that taxpayers receive procedural safeguards where the domestic law does not provide them or is inadequate.
Under the various international agreements on human rights, everyone has a right to a hearing within a reasonable time by a competent, independent and impartial tribunal established by law. Therefore, providing adequate judicial protection of taxpayers rights under these agreements.
The main human freedom conventions affecting taxpayer are:
(a) European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR, 1950):
ECHR makes a definite reference to taxation in Article one of the first Protocol on “protection of property”.
“Every natural or legal person is entitled to his possession’s peaceful enjoyment. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by the law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of the property by the general interest or to secure the payment of taxes or other distributions or penalties”.
Detailed Description of the Article
The Article states in its second paragraph that the freedom of a State to enforce its tax laws is unchanged. However, it must satisfy the underlying principles of the Convention. The tax must be imposed according to the law, it must serve a valid purpose in the public or general interest, and the provisions adopted must be a reasonable and proportionate means to achieve that end.
Therefore, it is only justified when it is according to law, necessary for a democratic society, and is not disproportionate.
The Court has also dealt with several tax cases on procedural issues. They involve information gathering by tax officials (e.g., telephone taps and home searches), tax claims and enforcement of tax liabilities.
Legal guarantees include the right to a Court or independent and impartial tribunal or, public hearing and determination within a reasonable period. In criminal trials, the taxpayer has the right to innocence, assumption of innocence, and legal aid.
Generally, the Convention is consistent with the prevailing principles of EU Law, namely effectiveness, equality, proportionality, legal certainty, and legitimate expectations and the protection of fundamental rights.
Examples of ECHR cases:
Where no breach was found including a search of the taxpayer’s house and office, the taxpayer’s ex-wife’s house and bank premises; request for payment of private expenses of the taxpayer; exchange of data between Revenue authorities, etc.
The enforcement of tax liabilities was upheld in cases involving withholding tax, taxpayer’s property seizure and personal liability for the company’s taxes in criminal cases. However, the right to a fair trial under Article 6 does not include the right to silence or the right to incriminate oneself.
(b) United Nations International Covenant on Civil and Political Rights (ICCPR, 1966):
UN Human Rights Committee supervises the commission. Currently, of the 145 signatory states, which are a party to the Covenant, 95 states recognize the right of petition. Although many of the provisions are similar to the ECHR, so far, they have decided on only a few tax cases.
OECD Report on Taxpayers’ Rights and Obligations
Majority of the countries have laws administering taxpayers’ rights and responsibilities in relation to taxation. In 1990, the OECD Committee of Fiscal Affairs drafted a document named “Taxpayers’ Rights and Obligations – A Survey of the Legal Situation in OECD Countries”. The survey revealed that basic taxpayer rights and obligations were present in all systems.
They included Basic Rights and Obligations
(i) Basic Rights
(a) Right to be Informed, Assisted and Heard
Taxpayers have the right to up-to-date knowledge on the tax system operation and the tax assessment process. They are entitled to be informed, including rights of taxpayers in India to appeal. Also, taxpayers can assume that the data provided to them should reflect the complexity of the tax situation, thereby enabling them to understand their tax affairs better.
(b) Right to Appeal
In the rights of taxpayers in India, tax authorities grant the right to appeal against tax authorities decisions to all taxpayers. The taxpayer is directly concerned on all tax authorities’ decisions on the law application or administrative rulings.
(c) Right to Pay No More than the Correct Amount of Tax
Taxpayers shouldn’t pay more tax than required by the tax legislation, taking into account their private circumstances and income. Thus, while it is acceptable to reduce the tax liability by legitimate tax planning, governments make a distinction between this form of tax planning and forms of tax minimization, which go against the intention of the administrator.
Taxpayers have the right to fair assistance from the tax officials for qualified reliefs and deductions in the taxation.
(d) Right to Certainty
Taxpayers have the freedom to a high degree of certainty as to the tax consequences of their actions. However, certainty is not always possible. For instance, taxpayers may not always know in advance the outcome of rules that are reliant on the facts and circumstances in a certain case.
Also, tax authorities cannot assure the application of anti-abuse provisions directed at taxpayers seeking to circumvent the legislation’s intention.
However, it is undoubtedly a goal that taxpayers should be able to predict the outcomes of their ordinary private and business affairs. Accomplishing this goal is often challenging because modern tax systems are complex and evolving.
(e) Right to Privacy
All taxpayers have the freedom to assume that the tax authorities will not intrude uselessly upon their privacy. In practice, this is avoiding unreasonable searches and requesting relevant information for determining the correct amount of tax due. Some strict the entry into a person’s dwelling or business premises by a tax official in the course of a tax investigation and on obtaining information from third parties.
In some countries, visits to a taxpayer require the consent of the taxpayer; the majority of countries require a signed warrant for a visit to a taxpayer who doesn’t permit the tax authority. Similarly, strict rules apply to obtain information from third parties on the affairs of a taxpayer.
(f) Right to Confidentiality and Secrecy
The information available to the tax authorities, on the affairs of a taxpayer, is confidential and used for purposes specified in the tax legislation. On the misuse of confidential information, tax legislation has the power to impose huge penalties. Furthermore, these confidentiality rules applied to tax authorities are rigid than those applied to other government departments.
Taxpayers bill of rights protects the taxpayers while ensuring that the powers of the tax authorities remain in check.
Above were the basic rights and responsibilities of taxpayers India. As accountable taxpayers and citizens across the globe, we have been funding the government. Taxation has been fueling the economy for ages and it will keep on doing so for the future. Stay inspired yourself and tell others to pay taxes on time so you can enjoy the benefits while watching the system grow for the good of all.