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Summary of the meeting of Fundación Impuestos y Competitividad, ICAM, and the School of Legal Practice concerning tax disputes: litigation facilitation measures and dispute resolution alternatives

1.- On 24 October a joint meeting was held at the School of Legal Practice of Universidad Complutense de Madrid (UCM), organised by Fundación Impuestos y Competitividad (FIC), and the Tax Law Area of the Madrid Bar Association (ICAM).

2.-The meeting kicked off with opening remarks by Jose Ignacio Monedero Montero de Espinosa, the Chair of the ICAM Court of Arbitration and Secretary of its Governance Body, Jose Manuel Almudí Cid, a Director of the School of Legal Practice, Gabriel Casado Ollero, the Chair of the Tax Law Area of the ICAM and Jesús López Tello, a trustee of FIC and coordinator of the recent work promoted by Fundación Impuestos y Competitividad on “Tax litigiousness: resolution alternatives and facilitation measures”.

All of them underscored the seriousness of tax disputes, and pointed out some of the reasons for them, condemning the authorities and the Spanish legislator’s inertia in reducing or mitigating them and coincided in underlying that the lengthy duration of tax lawsuits until their final settlement is a clear weakness in the system which, as observed by the Council of Europe, is ultimately a breach of the requirements of justice inherent in the Rule of Law.

3.- The round table discussion dealt with measures to speed up contentious tax litigations and was chaired by Rafael Fernández Montalvo, a judge emeritus of the Supreme Court and a Partner at the law firm Cremades & Calvo Sotelo. The discussion addressed the procedural facilitation measures included in the final chapter of the Foundation’s work, authored by two of the speakers, Joaquín Huelin Martínez de Velasco, Partner at Cuatrecasas and a former judge of the Supreme Court, and María Teresa González Martínez, a Doctor in Law and a Partner in Tax Procedures at EY Abogados.

3.1.-Joaquín Huelin started by underscoring the essential nature of legal certainty and the absence or lack thereof as a result of delays in the resolution of judicial litigations, in this case, as well as the lack of monitoring by the Administration and lower Courts of the criteria of the Supreme Court, which is constitutionally charged with the interpretation of tax law and regulations.

He continued to develop some proposals to facilitate and standardise resolutions based on prior interpretative criteria enabling facilitation, setting out a series of concrete measures which although minor in nature, could as a whole bring about a notable reduction in the duration of proceedings. These include, inter alia:

  • Shortening the period for sending the administrative case file.
  • Reducing downtime in cassation procedures, shortening the submission period.
  • Processing judgement enforcement through incidental proceedings, without giving rise to a contradiction in administrative proceedings and subsequently in contentious proceedings, increasing the length of the litigation twofold.
  • Bringing back the extension of effects of judgements, neutralised by the Courts themselves as a result of erroneous jurisprudence.
  • Establishing a preliminary ruling under domestic law for the initial interpretation of new rules when their lawfulness is questioned

Lastly, he upheld the need for legal backing of the binding nature of the Supreme Court’s criteria, without the need for the reiteration of like judgements.

3.2.-Maria Teresa González Martínez upheld the proposal to introduce the per saltum appeal which would mean having direct access to administrative -contentious proceedings when the cause of the ligation is the unlawfulness of an applicable regulatory norm or its possible violation of the Constitution or the Law of the Union, underscoring that it would involve providing express legal backing to a solution already partly upheld by the Supreme Court. In short, it would be unreasonable to require processing via economic-administrative proceedings when the underlying conflict may not be resolved in that instance, thereby generating a delay already known beforehand.

3.3.-Gerardo Martínez Tristán, a judge of the National Court and Member of the General Council of the Spanish judicial authority (CGPJ), ended the debate with a general evaluation of the work presented by the Foundation and the proposals set forth by the previous Speakers.

While agreeing with the breach of justice that the lengthy duration of proceedings until the resolution entails, and sharing, albeit with certain reservations, the timeliness of the measures suggested by his round table colleagues, he pointed out that in his opinion, the principal solution to the issue would consist of reinforcing jurisdictional activity.

Following that general consideration, he stressed that the FIC’s work took the delay for granted but it had not analysed the reasons in its search to explain it. He considered that, in his opinion, there was hardly a delay- with respect to the legal periods envisaged- in processing the case files, suggesting instead that the delay can be attributed to the extensive period that elapses until completion by sentencing.

Making express mention of the measures included in the so-called emergency plan for the Judiciary, crafted by the CGPJ following the pandemic, and the notable improvement brought about by the increase in resources which it temporarily activated for a year, which managed to reduce average processing of outstanding proceedings by almost a year, he went on to add that that improvement ended because of a lack of continuity. In his opinion, and in that same vein, the creation of a Technical Cabinet in the National Court, with the pertinent human resources, would reduce resolution times for legal proceedings.

He asserted that it is difficult to understand the lack of action aimed at strengthening the jurisdictional function, when taking into account the estimated number of ongoing lawsuits – €35,000 million- ,their resolution would free up an important volume of resources, compared with Spain’s GDP, in favour of the Administration or individuals, the measure being extremely positive for the domestic economy.

With respect to the economic – administrative tribunals, he positively valued their work and indicated that only a small percentage of claims submitted to the TEAC subsequently ended in tax disputes in the National Court.

He ended by advocating a limitation on the length of procedural submissions and judgements, beyond even that regulated in relation to cassation, finally recalling that the best claims are those that promote the delivery of the “best judgements”.

4.- The second discussion round table focused on analysing the alternative measures for resolving disputes and was chaired by Gabriel Casado Ollero, a Professor of Financial and Tax Law at UCM, with the participation as Speakers of Juan Arrieta Martínez de Pisón, a Professor of Financial and Tax Law at UAM and a Member of the Advisory Council of the Tax Law Section of the ICAM; Maria Luisa González-Cuellar Serrano, a Professor of Financial and Tax Law at Universidad Carlos III and a Member of the Taxpayer Defence Board; Pablo Chico de la Cámara, a Professor of Financial and Tax Law at Universidad Rey Juan Carlos and a Member of the Advisory Council of the Tax Law Department of ICAM and Manuel J. Silva Sánchez, an Advisor of the President’s Office of Foment del Treball and a Consulting Partner at Roca &Junyent.

4.1.- Juan Arrieta mainly focused his participation on analysing from a dogmatic and legal – constitutional viewpoint, firstly, whether alternative means for dispute resolution are admissible in Tax Law -a particularly special area of legal delimitation restricted to administrative discretion – and secondly, what alternative means are currently used in tax proceedings. He advocated for the introduction of agreement mechanisms in the processing of tax control procedures before the administrative assessment is issued since the agreements in relation to verification or the agreed determination of the facts or right which really avoid conflict are those arising during the proceedings or, in any event, before the resolution of the procedure. Otherwise, the administrative acts of adjustment or assessment would emerge in tendency as litigious, increasing tax conflict. Similarly, he proposed systems such as the current agreed assessment system, but under a different legal scheme from the one at present in order to avoid irrelevant or even perverse results.

He concluded by remarking on the need to establish a tax management or tax application model involving less standardised, less automated administrative proceedings, inspired by dialogue and cooperation, as compared with the current unilateralism. The large number of claims (fully or partly) upheld by the Economic-Administrative Tribunals (around 40 %) bears out the need to advance this agenda since this alone would entail a major reduction in conflict.

4.2.- María Luisa González-Cuellar underscored that once the constitutionality of the procedural agreements in relation to tax is established, along with the extent of their lawfulness (the legal and factual matters of the tax relationship which are objectively uncertain) and their binding effects, it would be necessary to explore the reasons for the limited success of tax agreements – specifically, agreed assessments-, taking into account the objectives which it is sought to attain through them: legal concord, procedural efficiency, legal certainty, the right of citizens to participate in administrative procedures, administrative efficiency or the reduction of the litigious tax debt outstanding.

Taking these premises as a starting point, she arrived at the conclusion that this limited success is due to the absence of genuine equality between the parties, namely, the taxpayer and the Administration, that has to abandon its position of superiority during negotiations but without losing sight of the fact that it is charged with managing the public interest. In order to balance the parties’ positions in tax agreements, she considered it appropriate to bring in an independent and neutral third party, who might be a mediator, conciliator or arbitrator. To do this, comparative experiences should be taken into account such as the Administrative Centre of Mediation which has existed for some time in Portugal and is charged with managing the agreement and choice of mediator.

4.3.- In this context, Pablo Chico commented on the reconciliation measures applied in comparative Law, during the administrative review phase and in the judicial phase (Germany, France, Italy, the Netherlands, UK, USA), after underscoring that tax issues are at the top of the list when it comes to the generation of litigiousness and in terms of the number of disputes pending resolution, as is borne out by the annual reports of the Economic-Administrative Tribunals and General Council of the Spanish judicial authority.

Similarly, he underscored the complexity of tax legislation, inviting the legislator to take on highly qualified personnel for the Economic-Administrative Tribunals: functionaries of the Administration or the Judiciary on leave of absence, reputed lawyers or academics, as has been the case in Italy since 2022 with the Tax Committees (equivalent to Spain’s Economic-Administrative Tribunals). In short, he highlighted that without the need for any legal adjustments, Article 473.1 LOPJ permits that functionaries from other Administrations may occasionally or permanently provide services in the Judiciary in order to help in the conduct of specific activities such as in those aspects of tax legislation which may be long and complicated and require technical or specialist knowledge.

4.4.- Manuel J. Silva Sánchez ended the meeting with a reference to the factors, which in his experience, hinder or condition the implementation of some of the procedural facilitation measures and tax dispute resolution alternatives examined or proposed in the two discussion round tables, agreeing with the need to move forward and implement litigation prevention measures.

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