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A disaster in the form of a 75-per cent income tax, or undisclosed sources of income.
2011-12-02

A disaster in the form of a 75-per cent income tax, or undisclosed sources of income.

Most taxpayers are convinced that they will never be subject to proceedings related to undisclosed income sources. Taxpayers working full-time, whose taxes are collected and settled by the employer, are the last ones to expect this inconvenient inspection. The proceedings are associated only with an unfair entrepreneur, who does not “issue receipts” and runs his tax records in an unreliable way.

My professional experience shows, unfortunately, that the disaster may happen to everyone. 

It is enough for a grandma or grandpa to offer their grandson a certain amount of money, which they had been „saving” at their home for 30 years of professional life, that would partly cover the purchase of a flat.

I call it a disaster since the proceedings are troublesome, not only because of the stress related to filling out property declarations and giving explanations concerning private life. It should be borne in mind that the proceedings are exceptional, since, in contrary to other proceedings, the taxpayer has the obligation to furnish proof.

It means that if, in the opinion of a tax office, expenses are higher than income, the taxpayer must justify where the difference came from. The office does not seek evidence showing where the taxpayer took the money for expenses that exceed income from, it should be provided by the taxpayer.

What is more, regulations do not specify the so-called „zero moment”, up to which the declared property is not subject to explanations in terms of its origin.

It means that the abovementioned grandma and grandpa must prove their year-by-year income and savings which allowed them to gather an amount of money specified in the deed of donation. And it is not enough to state that „in my youth I received a director’s salary”. Many would be surprised confronting their earnings against the data from the Central Statistical Office in terms of average expenses for maintaining a family in Poland in the last fifty years. You will be confronted against these official data in the proceedings carried out by a fiscal body, and you will not be able to explain even before an administrative court that you lived a more modest life than a statistical citizen. And the savings… There were years of hyperinflation, which theoretically devoured them all.

Taxpayer’s light-heartedness and ignorance of legal regulations give inspection bodies an advantage over an inspected person. It does not mean that the taxpayer must be helpless.  Only the knowledge of law from the first day of inspection, and solid self-examination allows effective defense. An inspected person who is ignorant of his/her rights and who expects the inspection to end soon, makes property declarations before an office clerk hastily and very often on the basis of memories from a few years back, whereas memory is fallible.

Administrative courts, unfortunately, usually dismiss complaints, since taxpayer’s reckless actions are impossible to correct at a court stage. There are obviously some „lights in the tunnel”, such as a decision of the Voivodship Administrative Court in Białystok, which ruled that a fiscal office must not require taxpayers to submit documents from over five years back. This opinion, however, is not favoured by judges.

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