**5. The "right to be heard" in tax exchange of information proceedings**

Exchange of information is a fundamental tool for cooperation between national financial administrations. In recent years, we have witnessed a significant evolution of the discipline of the phenomenon in the European and international level, which has led to an increasingly evident need for mutual support between administrations in order to fight tax avoidance. International organizations have set many goals aimed to fighting cross-border tax avoidance, including the implementation of internationally recognized cooperation, understood as an obligation of collaboration between the administrations.

In European legislation, the main source of exchange of information is contained in Directive 2014/107/EU (which has put an end to bank secrecy for tax purposes throughout the Union, is also of particular relevance, requiring Member States to automatically exchange a wide range of information on incomes and holdings abroad), than modified by Directive 2015/2376 and Directive 2016/881/EU on the mandatory automatic exchange of information in the tax field. Among the sources of international law, the main rule is art. 26 of the OECD Model Convention against Double Taxation. The need for states to get information more rapidly and automatically has led the European and international institutions to the elaboration of additional tools for data exchange. However, in the face of a strong development of regulatory instruments for implementation of the exchange of information, particular attention should be paid to the profile of the protection of the rights of the taxpayer, currently debated in the European case-law and without specific discipline in the international and community sources. It is clear that the taxpayer has a particular interest in the correct acquisition of news and data and the confidentiality of the information exchanged [16].

The absence of a specific discipline in the international and European sources which guarantees the protection of the taxpayer when exchanging information can lead to a number of issues: just thinking to the case of a state which violates the limits set for the exchange of information by disclosing a secret commercial or professional.

In fact, it is not foreseen that the taxpayer will be informed of the request for information made on his behalf by the financial administration of another state. Consequently, its right to oppose to that transfer of information it is not recognized and even the opportunity to expose its reasons in the course of investigation.

In this way the Court has opened to an interpretation that diminishes the same value of contradictory procedure, evaluating it on the proof that the result of the administrative procedure

In particular, art. 6 of the Treaty on the Functioning of the European Union undoubtedly guarantees substantial rights of the person. And so also art. 6 of the European Convention on Human Rights, which until now has found peaceful application in the protection of domicile and correspondence and in the application of sanctions, although not yet in the matter of taxes. In the same way art. 41 of the European Charter of Fundamental Rights, which has the same

Exchange of information is a fundamental tool for cooperation between national financial administrations. In recent years, we have witnessed a significant evolution of the discipline of the phenomenon in the European and international level, which has led to an increasingly evident need for mutual support between administrations in order to fight tax avoidance. International organizations have set many goals aimed to fighting cross-border tax avoidance, including the implementation of internationally recognized cooperation, understood as an

In European legislation, the main source of exchange of information is contained in Directive 2014/107/EU (which has put an end to bank secrecy for tax purposes throughout the Union, is also of particular relevance, requiring Member States to automatically exchange a wide range of information on incomes and holdings abroad), than modified by Directive 2015/2376 and Directive 2016/881/EU on the mandatory automatic exchange of information in the tax field. Among the sources of international law, the main rule is art. 26 of the OECD Model Convention against Double Taxation. The need for states to get information more rapidly and automatically has led the European and international institutions to the elaboration of additional tools for data exchange. However, in the face of a strong development of regulatory instruments for implementation of the exchange of information, particular attention should be paid to the profile of the protection of the rights of the taxpayer, currently debated in the European case-law and without specific discipline in the international and community sources. It is clear that the taxpayer has a particular interest in the correct acquisition of news

The absence of a specific discipline in the international and European sources which guarantees the protection of the taxpayer when exchanging information can lead to a number of issues: just thinking to the case of a state which violates the limits set for the exchange of

In fact, it is not foreseen that the taxpayer will be informed of the request for information made on his behalf by the financial administration of another state. Consequently, its right to

However, even the European treaties provide the "right to be heard" [15].

legal value as the European treaties, establishes the right to good administration.

**5. The "right to be heard" in tax exchange of information** 

obligation of collaboration between the administrations.

and data and the confidentiality of the information exchanged [16].

information by disclosing a secret commercial or professional.

would have been different.

132 Public Management and Administration

**proceedings**

The protection of the taxpayer in the exchange of information is therefore subject to rules of national law on the exercise of the instructing powers by the financial administration.

The subject may therefore oppose the procedure by maintaining that it is illegitimate only if one of the countries involved in the exchange established precise provisions on this. In some jurisdictions, like in the Italian one, the protection of the rights of the taxpayer appears subordinate to the appeal of the subject against an act emanated to him. In case the inquiry concerns information requested by another administration, the lack of administrative or judicial tools available for the taxpayer seems to make it impossible for any action to protect the injury of his rights.

On 22 October 2013, the Court of Justice of the European Union (ECJ) issued an important judgment in the case of Sabou v. The Czech Republic (Case C-276/12) concerning the application of the right of defense in the context of tax information exchange procedures. This was the first decision where the ECJ addresses the protection of the taxpayer's right of defense in the framework of international mutual assistance procedures in tax matters. In this regard, the ECJ adopted a twofold approach, considering both the provisions of the former Directive (the previous one n. 77/799/EEC) and the fundamental "right to be heard".

So, the problem is the fact that tax authorities are not bound to confer on taxpayers the "right to be heard" during the information-gathering stage, which includes both actions undertaken in the requesting state and those carried out by the requested Member State.

Therefore, it could be said that the right of defense, considered a general principle of EU law and also laid down in art. 41 of the Charter of Fundamental Rights of the European Union (EU Charter), does not oblige the requested state to inform the taxpayer about the existence of a request for information concerning him, the data-gathering process or the transmission of the information to the requesting state.

Notwithstanding this, the ECJ established a kind of twofold "balancing mechanism" from the point of view of the taxpayer's rights of defense: firstly, the "right to be heard" (as a general principle of EU law) should be granted before any decision is adopted at the end of the administrative proceedings by the tax authorities of the requesting Member State and, secondly, the affected taxpayer should be able to challenge, in accordance with its domestic rules and procedures, the accuracy and probative value of the information provided by the requested state in the context of tax proceedings within the requesting Member State where such information is used.

The Sabou decision shows that the fundamental right of defense of taxpayers affected by an exchange-of-information procedure in the requesting state (usually the country of the taxpayer's residence) is linked to the administrative and/or judicial proceedings implemented by the tax authorities of the requested state in order to gather the information. However, and despite such "interconnection", it must be clear that the rights of the taxpayer affected by the request for information in the requested state are independent of those which can be conceded by the requesting state.

A step forward compared to the Sabou decision was obtained with the decision 16 May 2017, Berlioz (C-682/15), in which ECJ established that the taxpayer can legitimately access, at least in part, the file of the exchange information, without any opposition to the protection of diplomatic relations between States.

It can be concluded by stating that the recognition of obligations for the public financial administration, corresponding to as many rights for the recipient of the tax claim, and assisted, in the event of non-compliance, from the penalty of the abolition of its provisions, far from favoring tax evasion, is a stimulus to the observance of fiscal obligations in a state of

The Involvement of the Taxpayer in the Public Administration Decision

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Michele Mauro is Author of paragraphs n. 5 and n. 6. Claudia Fava is Author of paragraphs

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[6] Del Federico L. Sanzioni proprie e sanzioni improprie. In: Giovannini A, editor. Trattato di Diritto sanzionatorio tributario, tomo II. Milano: Giuffrè editore; 2016. pp. 1317-1342

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n. 1 and n. 2. Alessandra Kostner is Author of paragraphs n. 3 and n. 4.

Michele Mauro\*, Claudia Fava and Alessandra Kostner

University of Calabria, Rende, Italy

nell'iva). Padova: Cedam; 1990

Italia S.r.l.; 2013. 1144 p

\*Address all correspondence to: michelemauromail@gmail.com

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[7] Pistolesi F. Gli interpelli tributari. Milano: Giuffrè editore; 2007

[8] Marello E. L'accertamento con adesione. Torino: Giappichelli; 2001

legality and collaboration.

**Disclaimer**

**Author details**

**References**
