B Law & Tax
28 August 2023

Tax advisor: Court says correction goes against administrative consistency by not having a sound reason for the change

In its ruling of April 20, 2023, the High Court of Justice of Castilla y León (Valladolid) examines whether the Administration has violated the principle of legal certainty by contradicting its own actions and criteria. The Chamber begins by recalling that there is no complete subjection to past acts or administrative precedents. The Administration may change its criteria if duly justified, avoiding arbitrary changes that may lead to unequal treatment and arbitrariness. Change is allowed if justified, but change without reason is not tolerated, as this could undermine the fundamental rights of the legal system and generate legal uncertainty.

In the present case, the discrepancy in question arises from the fact that the Administration assesses certain assets in a specific manner, while the taxable party argues that it has applied the same approach, having previously communicated it to the respondent in previous years in which the situation was regularized for the same tax. This situation was not modified by the Administration since the relevant documentation on the disputed assets was provided.

Although the Administration implicitly accepts this documentation, it undermines its effectiveness by arguing that the previous reviews focused on negative tax bases declared in the self-assessments, and not on the valuation of the assets themselves. The Chamber emphasizes that when the Administration reviewed the negative taxable bases, it did so supported by the documentation provided by the plaintiff, including the relevant accounting and liquidations. In this way, the Administration validated the taxable party’s approach and assumed its actions, a conclusion it would not have reached if it had considered the valuation of the assets to be incorrect or if it had considered it necessary to revise it.

Therefore, the Administration effectively determined that the taxpayer’s behavior did not present any objection, despite having the necessary documentation to question it at that time but chose not to do so. The Chamber argues that, logically, the claimant should have inferred that her conduct was correct, otherwise the Administration would have proceeded with the necessary correction.

Since no reasons are provided to justify the Administration’s change of opinion, and since the change of criterion contradicts the Administration’s obligation to adhere to its own acts and criteria, it is concluded that the claimant will face the paradox of choosing between two different criteria when making a new self-assessment, with no guarantee that a third one will not arise based on the criterion adopted at that time.

According to the Chamber, this approach is clearly incorrect, as it violates the aforementioned rules of administrative behavior. As a result, the claim is considered well founded and the resolution in question in these proceedings is annulled.

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