Fiskus can enforce the backlog, not drive the payer into tremendous costs – said WSA in Wrocław

Tax enforcement is 1 of the tools that allows the taxation collector to collect taxation arrears from debtors. However, this tool should be utilized with caution, especially erstwhile it can lead to an excessive burden on the debtor. The Provincial Administrative Court (WSA) in Wrocław in 1 of the last judgments reminded the fiscal officer that even in the execution process the principles of proportionality and logic should be respected, as well as ensuring trust in taxation authorities.

Case of seizure of a container with a working footwear

In June 2023, the taxation began execution against the company, which had a VAT arrears of PLN 97 thousand. As part of the execution, a container with 6.5 1000 pairs of workers' footwear was seized, which was left under customs supervision in a peculiar warehouse. The company, in financial difficulty, applied in October 2023 to release the container from execution. It pointed out that the administrative court had repealed the decision to safe the VAT claim and that its bank accounts remained blocked, making it impossible to regulate current liabilities, including those covered by the implementing title.

The company argued that the seizure of the container generates crucial additional costs. Within 3 months, in connection with the organization of freight forwarding services and container retention over 20 days, the company received invoices for almost PLN 112 thousand. Additionally, the seizure prevented the sale of the goods in the container, which further worsened the company's financial situation. Despite these arguments, officials refused to release the container from execution.

Fiscal and Proportionality

In consequence to the company's request, the fiscal officials stated that there was no reason to release the container from execution, as the ‘important interest of the obliged person’, which they considered not to have been demonstrated, is in favour of this. They pointed out that exemption from execution is possible only in situations related to values of common value, specified as life, human wellness or household protection. In addition, they pointed out that the company has another taxation arrears of hundreds of thousands of zlotys, and the goods occupied is the only asset from which effective execution can be carried out. Nevertheless, the company decided not to resign and referred the case to the administrative court.

WSA ruling: a informing to the tax

The Provincial Administrative Court in Wrocław acknowledged the company's rations and stated that the taxation in this case acted not only irrationally but besides contrary to constitutional principles, including the rule of proportionality. The Court of First Instance recalled that the exemption from enforcement at the request of the debtor is intended to destruct situations which lead to an excessive burden on the debtor. As the WSA noted, the specified nuisance of execution can be the basis for the release of assets from execution, and the fiscal act under the alleged administrative recognition.

The Court of First Instance stressed that the rule of proportionality requires that the actions of the enforcement authority be adequate to the nonsubjective to be achieved. In this case, the backlog was PLN 97,910, while the costs of storing the container already exceeded PLN 111 thousand. In the view of the court, the continued imposition of the company's retention costs was not intended and economically unjustified, which contravened the principles of proportionality and logic.

In addition, the WSA indicated that the taxus, taking over the container in June 2023, ordered the sale of the goods in it only at the end of November 2023. Nevertheless, this sale has not yet been made. This kind of action, according to the court, violated the rule of building trust in taxation authorities which should act rationally and transparently.

Conclusions and implications for the tax

The WSA ruling in Wrocław is an crucial reminder for taxation authorities that even in situations where they have enforcement tools at their disposal, their application must comply with the principles of law, including the rule of proportionality. The execution, which exposes the debtor to additional, unjustified costs, is not only contrary to logic, but besides to basic constitutional principles.

This judgment, although not final, may constitute an crucial precedent in akin cases. It reminds taxation authorities that their actions must not only be effective but besides proportionate and economically justified. In turn, debtors should remember that they have the right to defend their interests and can effectively challenge fiscal decisions that violate the principles of law.

This ruling may besides affect future practices of taxation officials, prompting them to examine the financial situation of the debtor more closely and the consequences of the enforcement actions taken. Compliance with the rule of proportionality not only protects debtors from excessive burdens, but besides builds trust in taxation authorities, which is crucial for the functioning of the regulation of law.

Legal basis: judgement of the WSA in Wrocław issued in the scope of this publication under the ref. act: I SA/Wr 210/24

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