Luxembourg V B And Others ' Striking The Right Balance? New Landmark Case On Human Rights And Tax Law Within EU Legal Framework

• Published date: 22 October 2020
• Subject Matter: Tax, Privacy, Data Protection, Privacy Protection, Tax Authorities
• Law Firm: WH Partners
• Author: Mr Aleksandr Belugin

Do the ends justify the means? In early October the CJEU delivered a landmark decision in the joint case of C-245/19 and C-246/19 of Luxembourg v B and Others - the 'F.C case'. This short article shall summarize some of the most important points discussed by the Court.

It is always big news for tax practitioners and lawyers when a new case appears on a European level involving tax and human rights. This time is no exception. When mandatory duties and statutory obligations are involved, there is always a question of balancing the rights of an individual vis-à-vis the State. The decision in a joint case of C-245/19 and C-246/19 of Luxembourg v B and Others revolved around the interpretation of the Directive on Administrative Cooperation in the Field of Taxation¹ [the 'Directive'] and the Charter of Fundamental Rights of the European Union [the 'Charter']. The Charter can be invoked by a party which feels that its rights stipulated therein have been violated by EU law or when a Member State is implementing and applying EU law.

The Directive provides for a framework of exchange of information, whereby the public authorities of Member States may issue requests to each other for information on taxpayers. Persons, both legal and natural, like banks, corporate service providers, etc. who possess relevant information may then be subject to an administrative inquiry to provide the said information. The Directive also establishes that the provisions of the General Data Protection Regulation ² [the 'GDPR'] apply. This is provided, that the Member States must limit the rights of notification and access to the information by the taxpayer when an inquiry is being made in relation to him. However, at the same time, the taxpayer who feels that his data privacy rights have been violated due to the inquiry must have an 'effective judicial remedy' - and this is without prejudice to any administrative and non-judicial remedies, including complaints to the data handling authority of the Member State.

The law of Luxembourg used to stipulate that there could be no appeal/administrative challenge for the request for the exchange of information itself.³ It did, however, state that the tax administration had to review the request to make sure that it was a relevant one, and that the said request met certain statutory requirements such as stating the legal basis, listing the parties concerned, etc. The law also provided for a penalty clause - failing to give the relevant information to the authorities could raise a liability of up to ?250,000.

While the law did not explicitly allow for a way to directly challenge the request for the exchange of information, the juridical practice did provide for a right to an administrative review of the imposition of a penalty to be heard by the Administrative Tribunal.

Both cases concerned an individual 'F.C' - Spanish authorities made two separate inquiries to Luxembourg in the context of tax investigations.

National Proceedings

In the case of C-245/19 - 'F.C I' the Luxembourg tax authorities [on a request from the Spanish tax authorities in relation to tax investigations of a Spanish national] requested certain information on a taxpayer from a private company. The information requested was contents of contracts, invoices, and details of bank accounts in relation to the taxpayer. The request also stated that it could not be appealed against, citing specific statute to that effect. Nevertheless, the taxpayer applied to the Administrative Tribunal to seek alteration or annulment of the decision to request...