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One cannot help noticing that during the past two weeks, the legal press has been inundated with articles on the case of Han and Yau (the Court of Appeal held that the imposition by Customs and Excise of penalties for alleged VAT and duties evasion gave rise to criminal charges within the meaning of Article 6 of the European Convention of Human Rights). Excluding the matter of a certain minor novelist receiving nemesis, one would be forgiven for concluding that this was the only important case decided in July. This is unfortunate because although Han and Yau is important, the focus on this case has enabled another case concerning taxpayers' human rights to slip by without receiving critical attention. Ferrazzini Italy, which was decided by the European Court of Human Rights on 12 July, is potentially of far more significance than Han and Yau because it concerns all taxpayers rather than just those accused of tax evasion.
The main issue in Ferrazzini was whether the right to a fair trial under Article 6(1) of the convention applies to tax proceedings. The court held that Article 6(1) does not apply. It held that a tax dispute is a public law matter and so does not involve the determination of a civil (private law) right.
One of the factors that seems to have influenced the court's decision is that it considered it to be politically expedient not to interfere with a country's fiscal policy, probably because this is closely linked with economic policy, a matter which is outside the convention. Yet, although there may be sound policy reasons for not interfering with a country's substantive tax strategy, it is considered that this policy justification should not prevent taxpayers from receiving procedural protection with regard to their disputes with the Inland Revenue. Even if a tax is not 'fair', it should be administered fairly.
As the Human Rights Act enables domestic courts to develop an indigenous body of human rights law, which is influenced but not bound by Strasbourg jurisprudence, there is a possibility that the UK courts may take the opportunity to extend taxpayers' rights beyond those recognised by Strasbourg. In the UK, the distinction between private and public matters is more blurred than in Continental Europe and tax disputes are dealt with by the civil courts rather than in a separate administrative system. The general commissioners were advised to proceed on the basis that Article 6 applies to all proceedings before them and both Stephen Oliver QC, presiding special commissioner and president of the VAT and Duties Tribunal, and Sir Nicolas Bratza, judge of the European Court of Human Rights, have suggested that tax proceedings should fall within civil rights. But despite these favourable indications, in the face of the clear and unambiguous decision by the Grand Chamber of the European Court of Human Rights in Ferrazzini, reaching a decision that a dispute over a tax assessment involves a civil right will not be easy.
So while tax evaders have a whole raft of protection against criminal charges offered under Article 6, honest taxpayers have no protection with regard to their disputes with the Inland Revenue. There are a number of aspects of the present civil tax system that arguably do breach the individual's right to a fair hearing under Article 6. It is virtually impossible for successful taxpayers to obtain their costs against the Inland Revenue and disclosure against it is extremely difficult. But in the light of Ferrazzini, a successful challenge against the Inland Revenue by use of Article 6 will be difficult.
Hartley Foster is a barrister in KLegal's tax litigation department