Financial incentives for tax inspectors to report defaulters

by Lorraine Williamson
tax inspectors

MADRID – It was previously mentioned by documentary filmmaker Ajeno Moreno in his documentary Hechos Probados (Proven Facts). Spanish tax inspectors are rewarded extra when they report alleged tax crimes. 

If the relevant taxpayers have acted correctly, the tax inspector does not have to hand in his premium. Therefore, no sanction will follow. That means an extra financial incentive for those inspectors to accuse citizens and entrepreneurs of tax evasion and other tax crimes. A practice that is becoming an increasing thorn in the side of tax lawyers and tax advisers. 

See also: Spanish tax authorities also crush citizens with inquisitional behaviour 

They also question the sharp increase in cases in which tax inspectors accuse suspects of tax offences. Meanwhile in the end nothing is wrong and the final verdict is acquittal. 

Professional football player Xabi Alonso wrongly accused 

A well-known example is the Spanish former professional football player Xabi Alonso. He was eventually acquitted five times. The owner of the renowned restaurant Nimo’s in Mallorca was also released after numerous unjust accusations. 

It doesn’t matter to the tax inspectors whether they turn out to be right or not. Their bonus, which according to Merca2.es is unknown to the public, remains. So while the tax authorities demand full access to the taxpayer’s profit and loss account, this government agency refuses to provide access to the payments to tax inspectors. 

Remuneration system inspectors must be made public 

However, the Spanish Association of Tax Advisers has now successfully filed a case against this secrecy. This means that the concept of productivity in the tax inspectors’ remuneration system must be made public. The court decision, of the Central Court for Administrative Disputes 4, agrees with the tax advisers. Despite this, the Tax and Customs Administration remains silent and refuses to show the salaries and additional concepts on the pay slips of the civil servants. 

Related post: Spanish court gives taxpayers weapon in the battle against tax authorities 

However, the verdict is not final and can be appealed. According to several lawyers specializing in tax law, “it would do transparency a disservice”. The association of tax advisers believes the system that has been hidden for so long should finally be revealed. 

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Complicated calculation 

Some of these tax inspectors themselves denied the bonus on their salary, while others have stated that it was part of their salary and that it was distributed based on productivity but that its calculation was very complicated. 

How surcharges are established remains obscure 

The government recently approved a new productivity allowance for tax inspectors. They would receive it based on “special achievement, extraordinary activity and dedication” as well as on the interest or initiative they show in their work. Nothing is reported about sanctions if they are repeatedly wrong. 

The government has again included this addition in the 2022 Budget. Thus, the tax inspectors receive their bonus, but without disclosing the exact amount or formula on which that amount is based. 

Perverse message to taxpayers 

Why is the Tax and Customs Administration so interested in keeping this reward system secret? This lack of transparency thus sends a perverse message to taxpayers. The same entity that wants to know all income and its origin hides a compensation system for civil servants whose salaries are paid by private taxpayers and companies. 

For example, tax inspectors can secretly increase their annual income on the back of partly innocent taxpayers. An investigation into a footballer for alleged tax embezzlement brings this footballer a lot of negative publicity. When the courts ultimately decide in favour of the accused, his prestige, image and honour are already tarnished, not to mention the costs of suing the tax authorities. While such a whole matter has no consequences for the tax inspectors involved. 

Paradox 

“There is the paradox that there is no sanction for tax inspectors and they can just keep their premium or pay,” said Jaime Campaner, a prestigious criminal defence attorney and tax expert, in statements to MERCA2. “An arbitrariness of the administration that is rewarded,” he added.  

The expert is also interested 

Campaner believes there is an “anomaly” because the tax inspector initiates the investigation, determines the existence of a crime and acts as an expert in the ensuing legal process. He is a party that is necessarily interested at the end of the lawsuit, receives incentives to do so in the form of extra money and also acts as an aid to the judge in tax matters where he has no legal knowledge or skills. he up. 

Campaner does not want to criticize the judges but suspects that they are inclined to trust the statements and opinions of the tax inspectors. For example, the “judges make judgments without noticing that the expert is also an interested party in the outcome of the dispute.” 

Impartial experts needed 

In this regard, Campaner insists on involving “unbiased experts” in these processes. “The case law shows that in many cases there is a stubbornness of the tax inspector involved,” he said. Furthermore, he pointed out that in some cases an inspector is removed from the case. All this leads to a “high success rate for the Tax Authorities in the courtroom. In this way, the assistant to the judge is a “party”, when it should not be. And no matter how the ruling turns out, sanctions for the tax advisor are not there. 

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