On March 6 and 7, 2015, a symposium was held in Århus, Denmark, in order to elucidate and discuss issues relating to taxation procedures in the Nordic countries. The symposium was prompted by a discussion in Denmark of the legal certainty of cases dealing with taxation. This discussion was based on three documents: a statistical analysis of the percentage of cases found in favor of the taxpayer, presented by L. Hulgaard (2014), a response from President Dahl (2014) of the Danish Supreme Court (
Both Sweden and Finland have a tradition of public administrative courts (in recent years, with some degree of specialization in taxation issues), whereas taxation cases in Denmark and Norway, like prosecutions and civil disputes, are heard in public general law courts. The Danish tax attorneys hoped, through the symposium, to persuade Danish politicians to consider otherways of organizing the authorities and law courts involved in taxation cases.
Taxation law can be viewed as unique for several reasons: the relationship between individual rights and the common good, the great complexity of the regulations and the continual amendments, and the substantial increase in international repercussions, for example. The statistical results presented in the Danish articles could be seen as an indication that judges are not always unbiased in their tax rulings.
It is my starting point for this article that judges should be seen as unbiased in handing down decisions and grounds in a way that does not favor one party. This starting point is self-evident. Lack of unbiasedness, however, does not imply the subjective intent to favor one of the parties. It is possible that lack of unbiasedness could exist because of the intuitive processes in decision making. Unbiasedness in legal decision making means that the legal interpretation is made unbiased. Yet because individuals make legal interpretations, itwould seem that interpretation can never be truly unbiased (Brederode and Krever 2014). I adopt the view of Brederode and Krever, who characterize interpretation as intersubjective: “Interpretation is the subjective understanding of interpreter of the law, which in itself is unbiased. The purpose of legal interpretation is to arrive at legal decisions on the basis of a coherent argumentation using generally accepted normative premises. Interpretation is constitutive since it determines what valid law is.”
My aim in the article is to provide an overall picture of the characteristics of rulings and proceedings related to taxation in these four Nordic countries Unfortunately this study did not include Iceland.
This study addresses three major questions:
How can it be guaranteed that taxation authorities unbiasedly determine the amounts for which taxpayers are liable for tax or that theymay deduct from their tax?
Is specialization in taxation issues in the courts desirable from the point of view of legal certainty?
And linked to the statistical studies presented at the symposium, are judges always unbiased? That judges should be autonomous and unbiased can probably be considered a self-evident proposition. It can probably also be assumed that all judges do, in fact, consider themselves, or at least must be expected to consider themselves, unbiased. But the major topic for discussion is twofold: Are judges in taxation cases really unbiased, and is it possible for them to maintain their unbiasedness at all times?
The comparison of the four Nordic countries benefits from the legal, cultural, and historical similarities of these countries and the fact that all four are civil law countries. Their tax legislations are extensive and, in some parts, highly detailed. The courts must, of course, play a role in interpreting both facts and law texts. It should be further noted that tax proceedings in Sweden and Finland are held in administrative courts—in contrast to in Denmark and Norway, where they are held in general courts. The choice is also a consequence of the countries represented at the symposium.
Although this article does not deal with tax law, as such, I am convinced that the discussions, even though some of them are made from national perspectives, can contribute to both the Nordic states’ debate and the international debate.
At an authority level, the burden of enquiry before a decision is made about taxation rests largely with the taxation authority, which must make a balanced appraisal of circumstances that speaks both in favor of and against the taxpayer. For a number of years, the Swedish Tax Agency has been the only central authority. In Finland, too, the authority is a unified one. In both countries, all authority decisions may be appealed to court by the taxpayers.
At the level of the law courts, Sweden lacks explicit regulations on the burden of enquiry in taxation cases. The burden of enquiry that normally applies is stipulated in the standard procedural regulations. 8 § förvaltningsprocesslagen (1971:291) (Swed.). 43 kap. 1 § skatteförfarandelagen (2011:1244) (Swed.).
In Finland, taxation cases in the law courts are also regarded as disputes between two parties. The state is represented by the Tax Recipients’ Legal Services Unit (Enheten för bevakning av skattetagarnas rätt), an independent unit within the Finnish Tax Administration. There are seven regional administrative courts divided into departments, one of which usually specializes in taxation hearings. Finland has no court of second instance comparable to the Swedish administrative courts of appeal. The Finnish Supreme Administrative Court (Högsta förvaltningsdomstolen) is the court of final appeal in taxation cases. The Finnish Supreme Administrative Court also requires an appeal permit and decides which cases it will review. Of the appeals, only 10–20 percent undergo substantive review (Olsson (2015)).
The Swedish Supreme Administrative Court is often seen to be adopting a formal style of interpretation, in which great importance is attached to the wording of the legislation, particularly if the wording is unambiguous. This situation also applies when interpretation results in a negative outcome for the taxpayer, compared to what would have been the result of a less formal interpretation (when wording in the 81 § grundlagen (Finl.).
In both Sweden and Finland, there are general statutory clauses prohibiting tax avoidance. The Finnish version has a somewhat broader application and can, unlike its Swedish counterpart, be invoked at the level of the taxation authority. The Finnish 28 § lagen om beskattningsförfarande. (Finl.) Lagen om skatteflykt (1995:575) (Swed.). RÅ 2004 ref 27 (Swed).
In Sweden and Finland, both parties in tax cases are initially responsible for their own trial costs. Either party in a court hearing in Finland can, in principle, be awarded compensation for its trial costs; in Sweden, only the taxpayer can receive this compensation. Lag om ersättning för kostnader i ärenden och mål om skatt, m.m. (1989:479) (Swed.).
In taxation proceedings in Denmark and Norway, the burden of enquiry also rests with the authority, of course. In Denmark, the system for decisions in authorities is somewhat more complicated than it is in the other three countries: There is nothing to prevent appeal against a decision at the highest level of an authority to a court of law—even by the authority. A taxpayer can request legal review of issues only if they have been subject to appraisal at the highest level of the authority, 240 §, 2 st. retsplejeloven (Denm.). 226 § retsplejeloven (Denm.). 20 § retsplejeloven (Denm.).
Pedersen (2014) asserts that it is generally accepted in Denmark that judicial proceedings occur in the same way and with the same interpretative data as other public proceedings. Section 4.3 of Chapter 5 of Denmark’s
Norway has a system that resembles Denmark’s (see Zimmer (2015b)). If a taxpayer is not satisfied with a decision from the taxation authority, appeal can be made to a tax appeal board ( Rt 2006 s. 1232 (Norw.)
Even though oral proceedings apply in Denmark, it was claimed at the symposium that the preparatory exchange of documents was of immense importance, as the outcome can be influenced already before the oral proceeding. Zimmer (2014b) asserts that things are slightly different in Norway. First, after the proceedings are finished, the judges confer about the outcome and the findings on which it is to be based with less constraint. In the deliberations among the judges, after the oral hearing, the presiding judge presents her, or his, view first, but in the voting, the presiding judge votes last.
Taxpayers who are successful against the state in Norway can be awarded compensation for their trial costs. At the authority level, these costs must have been substantial. The general rules about costs apply in court proceedings, the basic rule being that the losing party pays the other party’s costs. One exception occurs when there would be no clarity about the issue in dispute, and there exist good grounds for having it heard by a court of law, irrespective of which party wins the case. If the taxpayer loses, he or she may very well have to pay the costs for the state. It can be extremely expensive for taxpayers to pursue taxation cases in Norway.
In Denmark, it is possible to be awarded trial costs in connection with an appeal against the decision of the Danish Customs and Tax Administration, SKAT. Skatteforvaltningslovens §§ 53–54. (Denm.).
In Finland and Sweden, the governments exercise no control over the way taxation questions are dealt with by the authorities. There is some degree of cooperation with the government, however—at least in Sweden, where, when cases involving crucial questions of principle are lost, for example, new legislation is often initiated. Not infrequently, it begins at the authority level. The unification of the authorities means that there is firm central direction at authority level, which offers major advantages with uniform administrative routines, of course. There can be differences of opinion within the authority on difficult questions, but outwardly they present an appearance of unanimity. The Swedish Taxation Agency “must never initiate proceedings if it does not believe that they can be successful” (according to Inga-Lill Askersjö, formerly the authority’s Chief Legal Officer and now a justice in the Supreme Administrative Court, cited in Krzymowska
In principle, all taxation cases coming before a court in Finland are first dealt with by a tax correction board (
In Denmark, taxation decisions are administered by SKAT (
The mission of a national taxation authority could be expressed as to ensure the funding of the public sector and contribute to the effective functioning of society for its citizens and commercial sector. The government directives issued to the Swedish Taxation Agency lay down that the tax and duty revenues desired are to be levied in a manner that is legally certain, cost effective, and simple for citizens and companies. Here we encounter the usual pair of concepts: legally certain and cost-effective. At the same time, taxes and duties are to be determined so that the difference between those levied and the theoretically correct amounts (the taxation gap) will be as small as possible. Fi 2013/2986 and Fi 2014/4482 (Swed.). 12.2 regeringsformen (1974:152) (Swed).
In December 2012, the ministry gave the Swedish Taxation Agency the task of surveying and assessing whether the authority was taking legal action correctly (see Correct legal action is when a case has been brought in accordance with the taxation authority’s directives, guidelines and standpoints, when issues that are unclear have been checked with the legal department before action is taken, where decisions that are correct both substantially and formally have been made by the taxation authority and when the taxation authority has sufficient evidence for its litigation. This and all other translations into English are my own.
According to the report, “checked with” also means that an official has come to an agreement with the legal department at the authority on initiating legal action in a court of law to procure a ruling on the legal situation. The definition was interpreted in the survey to mean that cases involving proceedings were to be included in the review, irrespective of who launched them—who literally “took action.” In other words, all the proceedings in which the authority was one of the parties were included.
Denmark is in a unique position, as judges are already involved at the authority level, in the National Tax Tribunal (
Even if the task of a taxation authority is to make correct decisions on tax, one cannot exclude the possibility of there being a scope for the authority to test unclear issues of law or evidence. Once a taxation issue has left the authority level, however, it is undeniable that it comes before a court of law with the requirement that the “correct” decision will be made. Ryynänen (2004) contends that the court machinery provides the final guarantee that taxation is substantially correct. (For a general discussion of the unbiasedness of judges, see, for instance, Hart (1966).) The extent to which it is always possible to attain this level of unbiasedness is worthy of discussion (see, for instance, Dworkin (1997)) but a court must, of course, always endeavor to attain unbiasedness. It may be possible to discuss unbiasedness on the basis of statistical surveys, but mainly through the discussion of material questions and the way in which a court’s arguments and findings are presented.
One key responsibility in this context rests with a Supreme Court when ruling on taxation cases: to create precedents and provide guidelines, for authorities and other courts, on the basis of which legal sources are to be ranked in interpreting taxation legislation. Sometimes clear legal propositions can be formulated, but there are usually complex issues relating to questions of fact and evidence; thus the circumstances in a particular case make it difficult to generalize rules of law from it. My starting point here is that it should be incumbent on all courts that has been asked to make a ruling to give an indication, directly or indirectly, of the method of interpretation it has used, making it easier for subordinate courts to make rulings in their turn. A Supreme Court must create precedents in questions of law. When it comes to the way rulings are reached, I agree with Kellgren (1997) that this issue should be governed largely by material and methodological rules. My point of departure is that a central requirement for the effective creation of precedents and compliance with them is the court’s clear indication of the methodological rules and principles that have been applied in reaching a decision. If the court that is creating precedents accounts, for instance, for the premises on which it has followed supplementary sources to the legislation, it will then be easier for taxpayers and other courts to know how the Supreme Court values these sources. I support Kellgren’s position and maintain that an incisive discussion focusing on principles is desirable. The Supreme Court should therefore account for the grounds and the principles on which its choice of interpretive arguments and options has been based. It should also express itself in terms of principles, without exaggerated caution or stress on the specificity of a case, thereby promoting the methodological continuity required if predictability and uniformity are to be obtained.
In Sweden, as in the other Nordic countries, it is clear that the Supreme Administrative Court is not primarily intended to “see that justice is done”; rather it is intended to provide those applying the law with guiding rulings. Even though there is no requirement to comply with precedents, great significance is attributed to the court’s decisions.Not only its rulings, but also the grounds given for these rulings can play a critical role. The Supreme Administrative Court’s critical task could be considered the creation of precedents. Gäverth (2009)) has perceived an increase in the number of case-specific rulings and senses frustration in the subordinate courts and litigantswho are thereby deprived of adequate guidance from the Supreme Administrative Court. He has studied the reports from every case in every fifth year during the period 1975–2005 and has observed no change over time in the number of cases in which the court has written an explanatory statement. The proportion varies from 64 to 84 percent. There is a common belief in Sweden that only rulings from the highest instance contain the principle for the resolution of a legal issue that has value as precedents. The subordinate courts are expected to comply with the import of these rulings, as they do not want their decisions to be set aside if appealed. And hopefully also, to use the words of Sandström (1952, p. 273)), “in view of the uniformity that is desired in the application of the law.” What is interesting and still of relevance is Sandström’s discussion of how one can determine if a ruling really does contain a principle for the resolution of a legal issue. Sandström maintains that this should be apparent from the reasons given for the ruling. It is important, for the reasoning given, for a court decision to be as exhaustive and explicit as possible. Another quality aspect is that a ruling and the findings on which it is based should contribute to uniform interpretation of the law. As B. Hulgaard (1998) notes, judges need to be expert and highly ambitious. Lindell (2015) observes, however, that the professionalism of judges does not guarantee that every specific case will be judged correctly.
Despite the endeavor to attain rationality with regard to interpretation, the role played by unconscious processes or intuition can never be excluded nor can the impact of experience, common sense, and sound judgment. Modern research has shown that intuition is an automatic or subconscious process (Betsch (2008); Kahneman (2011); Lindell (2015)), which occurs against a background of accumulated experience. Experience provides judgment that is not merely based on recollection and analysis of each specific factor; it can also, in parallel, be dealt with the intuitive (Lindell (2015)). Kahneman (2011) writes about parallel thought processes—one based immediately on intuition and the other on cognitive processes. Legal appraisals differ from others, in that a court always has specific facts before it on which to base its rulings (Lindell (2015))—facts are often assessed intuitively but are deduced as intuitive appraisals become deductive. A court must justify its judgments and comply with the requirements of predictability and equality of treatment. According to Lindell, judging involves an automatic process that must be combined with an analytical appraisal. I claim, however, that there is a difference between accepting, on the one hand, that these factors can exist when decisions are made and maintaining, on the other hand, that they should be allowed to play a decisive role. There need not be any great difference—or perhaps no difference—between the results of the intuitive and the intellectual processes when a ruling is being decided upon. Experienced judges have, as Lindell (2015) notes, developed a large bank of expertise and experience that is used to enable rapid identification of the relevant issues and facts. The parallel thought processes may well lead to the same conclusion and probably do not take place in isolation. The significance of intuition in the legal system has also been discussed, for instance, by Andersson (2003); Gräns (2005), and Påhlsson (1998)), among others.
When it comes to factors as likelihood and fairness, apart from strict unbiased argumentation, they may not necessarily be excluded from legal interpretations based on principles. The grounds given for a decision (if such grounds exist) should in that case demonstrate awareness of factors as likelihood and fairness, and clarify them, thereby according greater transparency to the judgments and findings provided by the court of highest instance. Those applying the law must not be required to speculate if (and if so, in which situations) the Supreme Court has allowed these values to impact on outcomes (Påhlsson (2009)).
No extensive statistical surveys of the proportion of granted appeals have yet been made in Sweden and Finland, although Nyquist and Fast (2007) have maintained that rulings in Sweden are made against the taxpayer in two-thirds of cases in courts of the first instance (see also Fast and Leidhammar (2003)). Sutela
A great deal of energy has, in these two countries, been devoted to discussing the formal parameters for taxation cases. In Sweden, the official assessment is that increased specialization in dealing with taxation cases can contribute to greater legal certainty, better quality, and more efficient hearings. Increasing taxation specialization is also considered to play a decisive role in enabling a judge to manage proceedings more effectively. There has been an increase in taxation specialization in the two countries over time, which occurs within the courts. (For Sweden see Cedermark and Kristiansson (2015); SOU (2014, 76).) Specialization within the courts, which in Sweden’s case is at the administrative courts (
The purpose of the rulings in the subordinate courts is virtually only to determine, and give grounds for, legal outcomes in concrete cases. Rulings in the highest instance are further expected to create compliance by providing precedents. In neither Finland nor Sweden is there any formal requirement to comply with precedents. The compliance that prevails in practice is probably due to tradition, faith in authority, the structure of the system of appeal, and the expectation that a court has ruled in accordance with a “correct” well-based unbiased conception of the lawin force. To create compliance, in addition to justification of the specific outcome, the Supreme Court’s rulings and reasoning should contribute to increased knowledge of “the law in force.” This is not always the case. Referring to the difficulty, despite the high number of cases from the Supreme Court, of interpreting the Swedish general antiavoidance regulation (GAAR), for instance, Swedish practitioners sometimes claim orally that there is no point in intellectual appraisal on the basis of its application by the court, and that outcomes are far too dependent on which five justices happen to make the decision in a specific case about the GAAR (See Herman and Tjernberg 2011.) In my opinion, it is correct that rulings on the tax avoidance clause are case specific and often lack principle discussions, but I am doubtful about whether the outcome can clearly depend on which judges are making a ruling. (See the statistical analyses in Tjernberg and Herman 2011.)
As noted, taxation cases in Denmark and Norway are dealt with by the general courts. It is perhaps natural, therefore, that questions have arisen about the appropriateness of this system. Taxation law is extensive, complex, and constantly subject to amendment. Retsplejerådets betaenkning 1401/2001omreform af den civile retspleje, s. 142 (Denm.).
For the contrary opinion, see Andersen (1999), who has argued in favor of administrative courts in Denmark. According to Andersen, administrative cases are often burdensome, time-consuming, and costly. In addition, they constitute such a small portion of the total judiciary domain that courts could hardly be argued to have specific administrative law expertise. Andersen also argues that the administrative courts would subordinate to the Betænkning No. 1398/2001 fra Domstolenes strukturutredning, p. 223–224. (Denm.).
In Norway, too, there are discussions about whether the rulings of the Supreme Court are too favorable for the state. Zimmer (2015a) has conducted a study of the rulings of the court in the field of income and wealth tax between 1997 and 2012. He included 124 rulings, of which 57.3 percent were in favor of the state, 39.5 percent in favor of the taxpayer, and 3.2 percent divided. Zimmer discusses conceivable explanations: that only doubtful cases can obtain appeal permits, for instance, and that those in which the taxpayer has no prospects of success are not heard by the court. Zimmer has also examined the frequency of dissenting opinions.
The most interesting observation is that there are great differences among judges in the party they tend to favor in reaching their judgments. One justice had found in favor of the taxpayer in 62.9 percent of rulings and another in only 18.2 percent. For most of them, this figure was below 50 percent. Zimmer does not consider that there are any grounds for believing that an allocation of cases by ballot leads to the major differences, but rather that it cannot be discounted that the justices’ professional background plays a role. Justices with university backgrounds tend to be more favorable to the taxpayers, and those who come from positions in the Ministry of Justice are more likely to favor the state. Zimmer is extremely cautious in his conclusions, but claims that there is “no inconsiderable risk” that the composition of the court (5 justices in each case from a total of 20) may have a bearing on the outcome of a specific case.
In my opinion, it is fairly clear that Sweden and Finland, on the one hand, and Denmark and Norway, on the other hand, offer somewhat disparate approaches in ensuring the legal certainty in taxation cases. These differences should not be exaggerated, as all four countries are part of the Nordic legal tradition. Because of their mutually comprehensible languages, jurisprudential discussions of taxation law are disseminated and make an impact in all four of the countries dealt with here, which naturally applies to issues relating to taxation and legal certainty.
My aim in this article has been to help stimulate debate on how legal certainty in taxation should be ensured and theway it is discussed in the Nordic countries. Iwould also like to extend this debate to English-speaking researchers and practitioners in taxation law. My desire is to offer my view of how the organization of the authorities and the law courts can help to enhance legal certainty in taxation decisions and proceedings.
Taxation poses special challenges. From the point of view of society, it is vital for there to be an effective tax administration, and particularly important that a high degree of competence and unbiasedness be the ultimate goal in the courts. Unified tax administration enhances legal certainty and equality of treatment. At the authority level, levying the correct tax is another absolute goal, and a tax authority must make tax decisions in accordance with lege lata. In Sweden and Finland, specialization in dealing with taxation cases has been considered justifiable at the level of the courts, and Swedish studies have addressed this issue in recent years. The aim of specialization is to enhance legal certainty and raise quality. An additional argument for specialization is maintaining of expertise in the multifaceted area of taxation law. In both countries, specialization within the general administrative courts has been chosen rather than the establishment of specialized courts. In the Swedish court system at least, judges are offered continuing professional development in taxation law. Specialization has recently been proposed in Sweden in also the administrative courts of appeal as well as the administrative courts. In view of the limited number of cases granted permits to appeal in the Supreme Administrative Court further, the administrative courts of appeal often function in practice as the highest court of appeal, and therefore a development of this kind should be viewed positively from the perspective of legal certainty.
Legal authorizes in all four countries seem to be convinced that the court model they have chosen is the most appropriate. Traditions seem to be important, and the anticipated challenges following from a change of system may weigh more heavily than unsure improvements do. It is my impression, however, that Norway and Denmark could learn from the other two countries. Even though it is difficult, or impossible, to measure and compare degrees of legal certainty between specialist and generalist judges in deciding on specialization or generalization, a state´s choice could send essential signals to the stakeholders. Modern tax law is as complicated as ever, and expertise in tax law should raise the possibility of getting the "right" judgments. An argument for general courts is that quality of judgments benefits by knowledge of more general legal principles. Maybe the way the Swedish Supreme Administrative Court is organized could serve as an appropriate model: the preparatory work is made by specialists, but the judges decide not only in tax cases, but in all types of cases that come for the court.
In view of the significant role played by taxation for both the state and the individual, the additional costs that may be entailed in introducing and working with specialization must be viewed as justifiable. There is little meaning in contrasting general law courts to administrative courts in these discussions. No hierarchical conflict between the two systems is shown in Sweden.
Most people can probably agree that the administration of the law should endeavor as far as possible to be unbiased and devoid of value judgments. I believe that one must accept the fact that this is not always the face of reality and that values and preconceptions do, in fact, influence both research and administration of the law, desirable or not. Further along that line, is the question of whether it is acceptable that a judge not always adopt an unbiased approach in making judgments? The answer to this question is “no.” Judgments must, of course, be made unbiased, and it is self-evident that all judges believe that they always endeavor to judge issues correctly rather than considering which party is going to win the case. But toocategorical assertions of this self-image impede discussion of the process of making judgments and legal certainty. Raising awareness of the processes involved in judging can increase the stringency of argumentation, grounds, and conclusions in a judicial decision, to the benefit of legal certainty.