**2. The involvement of the taxpayer in the tax authority decision in Italian tax law**

The duty to file the tax return is central and represents the most important expression of cooperation with the Tax Authority, since it allows to know the condition for the application of the tax ("presupposto") and the relevant sources of income, and also to calculate the taxable income.

Furthermore, art. 32 D.P.R. of 29 September 1973, No. 600, identifies Tax Authorities' investigative and assessment powers: therefore, taxpayers' duties may be identified "in negative".

Firstly, Tax Authority may invite taxpayers to provide data and information, as well as to produce documents useful to assess the taxable income and issue a tax assessment notice.

Tax Authority may also require to the taxpayers subject to accounting duties, to provide the profit and loss account and other accounting records. Moreover, Tax Authority may send specific questionnaires aimed at collecting detailed data and information relevant to the tax assessment, and they have full access to all bank information regarding taxpayer's transactions. Such questionnaires should be filled in, signed by the taxpayers and returned to the Tax Authority. In addition, art. 32 D.P.R. of 29 September 1973, No. 600, lays down a general prohibition for the taxpayer to produce during tax litigation all the documents required (but not exhibited) during the tax assessment phase.

Tax Authority has also the right to request information to third parties, who are, therefore, subject to a general duty of co-operation.

This relationship is based on equity and cooperation in good faith, which stems from constitutional principles, such as the principle of sound administration (Art. 97 Italian Constitution),

Therefore, Tax Authority must exercise his control and assessment powers in compliance with

The fundamental expression of the involvement of the taxpayer in the public administration decision is the "right to be heard", intended as anticipation of the future activities of the administration. Precisely, it is a phase of research, acquisition and assessment of the evidence and of any other information which may facilitate a better reconstruction of the application of the tax ("presupposto"). In these terms, the "right to be heard" is an implementing tool for taxpayer's right of defense and for best practice in the public administration. Therefore, it should be mandatory, always and in any case, in accordance with art. 3 and art. 97 of Italian

However, as will be seen, this assumption is not found to be peaceful in national and European laws and in the interpretation of domestic and supranational jurisprudence. Therefore, it is necessary to reflect on the appropriate instruments to make it a fundamental principle at the

The duty to file the tax return is central and represents the most important expression of cooperation with the Tax Authority, since it allows to know the condition for the application of the tax ("presupposto") and the relevant sources of income, and also to calculate the tax-

Furthermore, art. 32 D.P.R. of 29 September 1973, No. 600, identifies Tax Authorities' investigative and assessment powers: therefore, taxpayers' duties may be identified "in

Firstly, Tax Authority may invite taxpayers to provide data and information, as well as to produce documents useful to assess the taxable income and issue a tax assessment

Tax Authority may also require to the taxpayers subject to accounting duties, to provide the profit and loss account and other accounting records. Moreover, Tax Authority may send specific questionnaires aimed at collecting detailed data and information relevant to the tax assessment, and they have full access to all bank information regarding taxpayer's transactions. Such questionnaires should be filled in, signed by the taxpayers and returned to the Tax Authority. In addition, art. 32 D.P.R. of 29 September 1973, No. 600, lays down a general prohibition for the taxpayer to produce during tax litigation all the documents required (but

**2. The involvement of the taxpayer in the tax authority decision in** 

base of the relationship between taxpayer and tax administration.

fairness and solidarity (Art. 3 Italian Constitution).

Constitution, and with European law.

not exhibited) during the tax assessment phase.

such principles.

128 Public Management and Administration

**Italian tax law**

able income.

negative".

notice.

Another example of the duty of cooperation between taxpayers and Tax Authority is the "audi et alteram partem" mechanism [2], provided by art. 38 D.P.R. of 29 September 1973, No. 600, in line with the right to defense, in the synthetic assessment (so-called "expenditure assessment system") [3], and by art. 10-bis Law of 27 July 2000, No. 212 (entitled rights and safeguards of taxpayers subject to tax audits), that regulates tax avoidance and abuse of law [4].

As well as, with respect to tax audits, Art. 12, para. 2, Law of 27 July 2000, No. 212 provides that taxpayers have always the right to be informed about the reasons justifying the tax audit, the object and the transactions analyzed, as well as the right to be assisted by a professional advisor – who shall represent and assist the taxpayer in tax litigation against ITAs – and all other rights and duties enjoyed by the audited taxpayer. Moreover, according to art. 12, para. 7, Law of 27 July 2000, No. 212, the audited taxpayer has the right to provide written comments within 60 days after the delivery of the tax audit report [5].

The tax system provides also some "indirect" or "improper" sanctions, which, in presence of behaviors not corresponding to the requirements of collaboration and good faith, prevent or reduce the taxpayer's right to defense both in the administrative phase and in the one before the Tax Court [6].

Furthermore, in the Italian tax system there are various kinds of advance ruling, with different procedures, but all of them have in common the specific aim to give taxpayers the possibility to request (and obtain) a decision from the Tax Authority concerning the correct application and interpretation of certain tax rules applicable to a concrete situation.

Advance ruling procedures are, essentially, instruments aiming to give the taxpayer the right to know in advance Tax Authority approach in case of objective uncertainty: consequently, those instruments allow the taxpayer to behave in line with such approach.

The protection of the taxpayer's legitimate expectations at the end of the advance ruling procedure is the basic reason that motivates the effects on these mechanisms on administrative tax penalties [7].

In the direction of the cooperation between taxpayers and Tax Authority moves also the agreement on the notice of assessment (so called "accertamento con adesione"), that allows the taxpayer to reduce its tax liability, avoiding to engage a tax litigation before the Court: this procedure, which may be started by the Tax Office or by the taxpayer, allows the parties to reach an agreement that re-determine the taxpayer's tax liability [8].

However, the measures described above do not seem to be sufficient in order to ensure the involvement of the taxpayer in the tax authority decision, mostly because such involvement is not fully available for taxpayers in every procedure.

In fact, for the taxpayer's full participation in the tax authority decision, to the taxpayer should always be acknowledged the "right to be heard", on which we will discuss in detail below.
