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. Last Updated: 07/27/2016

Tax Blackmail Through the Use of the Taxpayer's Personal Account Card

All companies are registered with the tax authorities by means of special cards called taxpayer's personal account cards that keep payment records. They usually contain information about the taxpayer's settlements with the budget and the current tax due. Such cards are used by the tax authorities to check if a company has tax debt or overpayments.

If the taxpayer has tax due, a tax payment request can be issued and the enforcement procedure initiated. Moreover, the information given to third parties concerning a taxpayer's fulfillment of its tax obligations is based on the information on the taxpayer's personal account card.

The tax authority has begun to use the personal account card as an effective method to force the taxpayer to pay taxes due.

The legal right to collect this tax has already been lost by the tax body in connection with the expiration of a limitation period under "unfulfilled payments" or in violation of the collection procedure.

The procedure is simple.

The tax authority does not directly collect the tax debt. However, the personal account card stipulates the tax due and the penalty charged. When the taxpayer applies to the tax authority for a certificate confirming the absence of tax debt, often as part of a business tender or in order to obtain credit -- it receives a certificate stating that it is a debtor. Such a certificate can be appealed in court, and the tax authority may be entitled to issue another certificate confirming the absence of tax debt. But the court procedure takes considerable time, and the chance to participate in a tender would be lost. In this context, some taxpayers have to pay taxes that the tax body no longer has the right to collect in order not to miss out on profitable business.

Some taxpayers who have a disputable tax debt registered on their personal account cards have directly appealed to the courts. At first, the courts satisfied the taxpayer's claim and obliged the tax authorities to exclude information on nonexistent debts or debt that the tax authorities did not have the right to collect from the tax record. However, this positive practice was changed by the Supreme Arbitration Court, which has issued rulings that the personal account of the taxpayer kept by the tax authorities is a form of internal control.

Information on the amount of taxpayer debt in internal control documents does not violate the legitimate interests of the taxpayer because it has no legal consequences.

As the courts began to deny claims to exclude disputable debt from personal account cards, the tax authorities in some cases abused taxpayers' rights. For example, frequent requests were issued to taxpayers for the payment of a previous period debt on the basis of information contained in the personal account card. Taxpayers appealed such requests in court and won. However, upon the next attempt to obtain such confirmation from the tax body, the company again received a certificate confirming tax due.

As a result of this "tax blackmail," companies often had to pay taxes that the tax authority had no right to collect.

Nowadays, the courts are reconsidering the problem.

This year, the Federal Arbitration Court of the Moscow region has made several decisions favorable to the taxpayer, stipulating the following provisions:

Decisions of the Supreme Arbitration Court do not specify that the information from the personal account cards never violates the taxpayer's rights. On the contrary, when the court considers such disputes, it emphasizes that the information on debt amounts in internal records doesn't violate the taxpayer's rights. Therefore, if a company proves that incorrect information resulted in a violation of its rights, the courts grant the claim for the exclusion of the disputable debt from the personal account card.

It also established that if the court recognized the nonregulatory act (request for payment of the taxes, certificate confirming the debt issued by the tax inspection) as invalid according to Article 201 of the Arbitration Procedural Code, the tax authority was obligated to eliminate the violations and exclude the disputable debt from the personal account card the procedure correlated with a position of the Supreme Arbitration Court.

Therefore, if the taxpayer needs to force the tax authority to exclude the debt amount from the personal account card, he may apply to the court with a request for the recognition of the nonregulatory act as invalid and issued on the basis of the incorrect amount of tax due contained in the personal account card and to request that the disputable debt be excluded from the personal account card.

Such measures will allow the taxpayers to protect their rights in court with a high probability success and avoid "tax blackmail."