PLAT ROR OCH SVETS SERVICE I NORDEN AB v. SWEDEN
Inadmissible
Alvina Gyulumyan;Corneliu Bîrsan;Egbert Myjer;Elisabet Fura;Josep Casadevall
1. The first applicant (the applicant company) is a Swedish limited liability company, Plåt Rör och Svets Service i Norden AB. The other applicants, Mr P. Ernmark (the second applicant), Mr C. Hedberg (the third applicant), Mrs L. Brandtler (the fourth applicant) and Mrs A. Bergqvist (the fifth applicant), all of whom are Swedish nationals and live in the south of Sweden, are the owners of the applicant company. The applicants are represented before the Court by the second applicant. 2. The second applicant has also made some separate complaints. He is, regarding these complaints, represented before the Court by Mr. P. Friis, a lawyer practising in Malmö. 3 4. In January 2003 the Tax Authority decided to perform a tax audit of the applicant company. On 12 March 2003 a preliminary audit report (förhandspromemoria) was drawn up. 5. In March 2003, on the basis of the findings of the preliminary audit report, the Tax Authority requested the County Administrative Court (länsrätten) of the County of Skåne to sequestrate (belägga med betalningssäkring) the applicant company’s assets to the amount of 3,341,097 Swedish kronor (SEK) which corresponded to the company’s tax debt, including tax surcharges, as estimated at that time. The Tax Authority further requested that the decision be taken without the applicant company having been heard or informed of the request. 6. The Tax Authority submitted that it had discovered invoices that appeared false (osanna), in that they gave the incorrect impression that the applicant company had hired labour from subcontractors (under-entreprenörer) in order to make deductions for costs and ingoing value-added tax (VAT), thereby avoiding paying employer’s contributions (arbetsgivaravgifter) for its own employees. Furthermore, the Tax Authority pointed out several defects in the invoices, for example, that they lacked information proving the amount of hours worked and who the customer was. The Tax Authority further claimed, inter alia, that most of the subcontractors had not, during the time they were supposedly supplying the applicant company with labour, accounted for any salaries paid to employees. 7. On 28 March 2003 the County Administrative Court rejected the request for sequestration as it found that the Tax Authority had not, to a sufficient degree, proven that the applicant company had the alleged tax debt. 8. The Tax Authority appealed against the judgment to the Administrative Court of Appeal (kammarrätten) in Göteborg, maintaining its claim but no longer requesting that the decision be taken without the applicant company having been heard or informed of it. In particular, the Tax Authority stressed that a representative of one of the subcontractors who had been heard during the preliminary criminal investigation (see § 15 below) initiated by the National Economic Crimes Bureau (Ekobrottsmyndigheten – hereafter “the Bureau”) had denied any knowledge of the applicant company and had denied that he had issued any invoices to it. 9. On 9 May 2003, on the applicant company’s request, an oral hearing was held before the Administrative Court of Appeal. At the hearing the Tax Authority referred to some interrogation reports (förhörsprotokoll) held with four persons during the Bureau’s preliminary criminal investigation. These reports had, prior to the oral hearing, not been referred to by the Tax Authority. The Administrative Court of Appeal adjourned the hearing for 25 minutes to give the applicant company’s representative time to consider the new material. When the hearing resumed, the applicant company objected to the fact that the Tax Authority had been allowed to refer to selected parts of the very extensive body of information to which only the Tax Authority had access. 10. At the conclusion of the hearing the applicant company was afforded one week to supplement the grounds for its plea. 11. The applicant company demanded that the Administrative Court of Appeal reject the Tax Authority’s appeal and that the court grant it access to all the information in the Bureau’s criminal investigation. It submitted that the invoices corresponded to services ordered and paid for and that it had verified that all subcontractors had certificates proving that they were responsible for paying taxes and contributions for their businesses (Fskattebevis) and who their legal representatives were. 12. On 17 September 2003 the Administrative Court of Appeal rendered its judgment in the case. It found that the merits of the case were such as to make it probable that the applicant company would not be allowed to deduct the ingoing VAT. It further considered there to be an obvious risk that the applicant company would try to shirk responsibility for the debt. Therefore, and since the court did not find it disproportionate, it granted the Tax Authority’s request as regards the VAT. However, the court found that it would be in breach of Article 6 of the Convention to sequester the applicant company’s assets corresponding to the estimated tax surcharges. The court, therefore, rejected the Tax Authority’s appeal in that part. The court also found that it could not, within the instant case, try the applicant company’s request to grant it access to all the information in the Bureau’s criminal investigation. Therefore, it dismissed that request. 13. Both parties appealed against the judgment. The Tax Authority requested the Supreme Administrative Court (Regeringsrätten) to sequester an additional part of the applicant company’s assets, corresponding to the debt regarding tax surcharges, whereas the applicant company requested the court to quash the Administrative Court of Appeal’s judgment. In its appeal, the applicant company complained, inter alia, that the Tax Authority had been allowed to use selected information from the criminal investigation and that the applicant company had not been allowed access to the entire investigation. 14. On 19 December 2003 the Supreme Administrative Court granted the Tax Authority leave to appeal and, on 22 September 2004, it found that the sequestration of assets to cover tax debts concerning tax surcharges would not be in violation of the Convention, as long as the principle of proportionality and the limitations set out in the Law on sequestration for taxes, tolls and fees (lagen om betalningssäkring för skatter, tullar och avgifter) were respected. The court then noted that the tax debt, including the tax surcharges, had at the time of its judgment been confirmed by the Tax Authority. After having observed that the tax debt concerned a substantial amount, the court found that there was a considerable risk that the applicant company would try to shirk responsibility for the debt. Therefore, and since the court did not find it disproportionate, it granted the Tax Authority’s appeal and sequestrated additional property corresponding to the tax surcharges. In the same judgment, the Supreme Administrative Court refused leave to appeal in all other parts of the case. 15. At some point the Bureau had initiated a criminal investigation regarding aggravated tax crimes and aggravated book-keeping crimes against several people involved with the applicant company, including the second applicant. In April 2003 the Bureau conducted a search of the applicant company’s premises, questioned several people and seized part of the applicant company’s books. However, on 30 December 2004 the Bureau dropped the criminal investigation against the second applicant, since it considered that it would not be able to prove that he had committed any criminal acts. In January 2006 the criminal investigation was dropped against the other suspects. 16. On 15 December 2003, the applicant company was declared bankrupt, as it was unable to pay its tax debts (other than the ones concerned in this case) and therefore found to be insolvent. 17. On 14 January 2004 the Tax Authority decided that the applicant company was not entitled to certain deductions claimed by it in its VAT declarations for the period July-December 2002. Therefore, it refused the applicant company VAT deductions amounting to SEK 2,812,174 and, in addition, found the applicant company liable to pay SEK 562,432 in tax surcharges (skattetillägg), as it was considered to have supplied incorrect information in its VAT declarations. This decision was based on the results of the tax audit of the applicant company that had been carried out by the Tax Authority between January and December 2003 and which had resulted in an audit report (revisionspromemoria) of 2 December 2003. 18. The Tax Authority’s decision was not appealed against by the applicant company or any of its representatives. 19. Some time during 2004 the Tax Authority requested the County Administrative Court of the County of Skåne, in accordance with the rules on personal responsibility for representatives of corporations (företrädar-ansvar), to oblige the second applicant to pay SEK 517,711 with interest to the State. The Tax Authority claimed that the applicant company, according to the audit report, had issued false invoices to cover up payment of salaries to the applicant company’s own employees. By making deductions for the ingoing VAT in the invoices, the applicant company had, inter alia, wrongfully been awarded repayment of a surplus of ingoing VAT to the amount of SEK 517,711. The Tax Authority further submitted that the second applicant, who owned shares in the applicant company and who had been its only board member and sole representative, had with intent or through gross negligence supplied the authorities with false information which had led to the applicant company being wrongfully awarded repayment of a surplus of ingoing VAT. Moreover, the Tax Authority noted that it had decided in accordance with the information in the tax audit and that neither the applicant company nor the second applicant had appealed against its decision, despite the fact that such a possibility existed before as well as after the Tax Authority had petitioned the County Administrative Court in the present case. Therefore, the Tax Authority argued, no examination of the validity of the underlying tax decision should be made in the present case. 20. The second applicant contested the claim. He submitted, inter alia, that the applicant company had not been wrongfully awarded repayment of ingoing VAT and that the Tax Authority had not been able to prove that the invoices were false. The applicant company had not appealed against the Tax Authority’s decision of 14 January 2004 because it had by then been declared bankrupt. Furthermore, he submitted that he had not acted with intent or gross negligence. He had come into an already on-going business and the actual administration of the company had been handled by two other persons who had been responsible for all invoices. The invoices had also been inspected by the applicant company’s accounting consultant, who had made no criticism of the invoices or how the company was run. The second applicant himself had made sure that all the subcontractors had certificates proving that they were responsible for paying taxes and contributions for their businesses and that the companies had complete boards of directors. Therefore, he had had no reason to believe that the invoices were false and no criticism could be made of his management of the company’s administration. Moreover, the second applicant claimed that there were special reasons to remit liability, in full or at least partly, because his influence and involvement in the company’s business had been limited and very brief. 21. On 30 May 2006, after having held an oral hearing, the County Administrative Court rendered its judgment. It first noted that the second applicant had been a shareholder and the sole member of the board in the applicant company during the time when the incorrect information had been given and that he had signed the tax declarations which had contained the incorrect information. The court further considered that the second applicant had had an obligation to ensure that the applicant company promptly and correctly paid its taxes and fees. In its view, none of his objections were such as to call into question the validity of the underlying tax decision. In any event, the court observed that the second applicant had had the overall responsibility for the management of the company and that he could not relinquish this responsibility to his colleagues. Lastly, it stressed that he had been responsible for ensuring that the information given in the tax declarations was correct. Thus, the court found that the second applicant’s insufficient control over the management of the applicant company amounted to gross negligence. Therefore, and since there were no reasons to remit liability, the court granted the Tax Authority’s request. 22. The second applicant appealed against the judgment to the Administrative Court of Appeal in Göteborg, requesting, in the first place, that the court reject the Tax Authority’s petition. In the alternative, he requested that the liability be remitted in full or lowered. He maintained his claims and stressed, inter alia, that, despite a lengthy investigation into the applicant company by the Bureau, no one had been charged with any criminal acts. 23. The Tax Authority disputed the appeal and submitted that the Bureau had dropped the criminal investigation because it had not deemed it possible to prove whether the acts had been committed by the second applicant or another person involved with the company. 24. On 27 December 2006, after having held an oral hearing, the Administrative Court of Appeal rendered its judgment. It first noted that the case before it had come to concern mainly the question of the significance of the underlying tax decision of 14 January 2004. In this respect, it noted that there had been no appeal against the tax decision and that the second applicant had not requested that the decision be tried in accordance with Chapter 22, section 15 of the Tax Payment Act (skattebetalningslagen). Hence, the court found that, because of the existing possibilities for the second applicant to have the underlying tax decision tried, before as well as after the Tax Authority had petitioned the County Administrative Court in the present case, the validity of the underlying tax decision could not be tried within the instant proceedings. The court then considered that the second applicant’s management of the applicant company had been lacking to such an extent he had to be considered grossly negligent. Therefore, and since there were no special reasons to remit liability, the second applicant’s appeal was rejected. 25. The second applicant appealed against the judgment to the Supreme Administrative Court where he maintained his claims. He also complained about the fact that the Administrative Court of Appeal had refused to try the validity of the underlying tax decision within the instant proceedings. Furthermore, he stressed that the criminal investigation against all persons involved in the applicant company had been dropped, for which reason the Tax Authority should not have been allowed to refer to the allegedly false invoices. He further claimed that the courts had violated the presumption of innocence when they based their judgments on criminal acts which had not been proven. 26. On 10 May 2007 the Supreme Administrative Court refused leave to appeal. 27. The Law on sequestration for taxes, tolls and fees (lagen om betalningssäkring för skatter, tullar och avgifter, SFS 1978:880 – hereafter “the 1978 Act”) contains provisions that give the State a possibility to sequester property to ensure payment for a claim for taxes, tolls, or fees in situations where it is feared that the debtor might otherwise try to shirk payment. The provisions roughly correspond to the provisions on provisional attachment (kvarstad) possible in civil or criminal cases and their purpose is to secure temporarily payment of the State’s claims until voluntary payment of the debt is made or it can be secured through attachment (indrivning). 28. Section 1 of the 1978 Act states that a debtor’s property may be sequestered to cover the State’s claim for taxes, tolls or fees. If the claim has not yet been confirmed (fastställd), sequestration may be utilised only if there is probable cause (sannolika skäl) to believe that the claim will be confirmed and only to the expected amount of the confirmed claim. 29. From section 2 of the 1978 Act it follows that sequestration may be used also as regards claims for VAT and tax surcharges. 30. According to section 4 of the 1978 Act, sequestration may be used only if there is a considerable risk that the debtor will try to shirk payment of the debt and the debt concerns considerable amounts. Furthermore, sequestration may only be used if the reasons for sequestration outweigh the encroachment or harm suffered by the debtor or any other opposing interest. 31. The Tax Payment Act (skattebetalningslagen, SFS 1997:483 – hereafter “the 1997 Act”) contains, inter alia, provisions regulating how to account for and how to pay one’s preliminary and final tax and VAT. It also prescribes responsibility regarding payment of taxes that can be levied on representatives of corporations. 32. Chapter 12, section 6 (a) of the 1997 Act states that if a representative of a corporation, with intent or by gross negligence, has supplied incorrect information which has led to the corporation being wrongfully awarded a surplus of ingoing VAT, the representative is responsible for the repayment of the amount with interest, together with the corporation. 33. If there are special reasons (särskilda skäl) the liability for the representative may, according to Chapter 12, section 6 (b) of the 1997 Act be remitted, fully or in part. 34. Chapter 22, section 15 of the 1997 Act states that a representative of a corporation, against whom proceedings in accordance with Chapter 6, section 6 (a) have been instituted, may institute proceedings before a court to have the validity of the underlying tax decision tried.