The role of Article 47 of the EU Charter of Fundamental Rights in direct and indirect tax cases: Parallel or divergent ways?, by Katerina Pantazatou

1.    Introduction

This post aims to critically examine the evolution of the application of Article 47 of the Charter in certain tax cases. ‘Tax cases’ is a general term that comprises two vast areas of taxation; indirect taxation, notably Value Added Tax (VAT) and excise duties, and direct taxation, mainly, taxes on income and capital. This distinction is crucial for the applicability of the Charter as a whole but, more specifically, the applicability of Article 47. The area of indirect taxation is largely harmonized within the EU, counting numerous directives that culminated with the Sixth VAT Directive. As a result, the applicability of the Charter, especially after the Åkerberg Fransson judgment, was not a major issue. By contrast, secondary EU law dealing with direct taxation was in a rather nascent state until recently. The adoption, inter alia, of a series of directives in the area of administrative cooperation and taxpayers’ information exchange, the famous DACs, spurred several cases referred to the CJEU concerning the protection granted to taxpayers and information holders under the Charter and Article 47, specifically.

2.    Direct taxation case law

The first case pertaining to the taxpayers’ effective judicial protection was the Grand Chamber Sabou judgment. While technically the Charter did not apply in this case, the Court considered it under the general principle of the (umbrella) right of the defence. Thus, to the complaint filed by the taxpayer (Mr. Sabou) claiming he was not invited to participate in the information-gathering procedures launched by the tax administrations of the requested Member States, the Court replied, regrettably, that as the collection and exchange of information took place during the investigation stage, Mr. Sabou did not have the right to be notified, nor to be heard. This pattern of the ‘lower protection’ afforded to the right holder[GT1] [GT2] [AP3]  in the investigation procedure as opposed to the contentious procedure in tax cases was continued by the ECtHR in the Othymia decision.

As this line of reasoning was considered unfavourable for the taxpayers,  proponents of the protection of taxpayers’ fundamental rights welcomed the subsequent case-law, starting with the Berlioz judgment. In this case, the CJEU affirmed for the first time – in the context of administrative cooperation in tax matters – the applicability of the Charter. In casu, Berlioz, the information holder, under Article 6(1) ECHR and Article 47 of the Charter, challenged his inability to subject to full judicial review the information order of the Luxembourg tax authorities, that was issued pursuant to an information request by the French tax authorities. The Court confirmed not only that the Charter was applicable as the penalty imposed to Berlioz for failure to comply with the information order intended to ensure the application of DAC 1, but also that in the context of the review of the penalty decision against Berlioz, the national court had jurisdiction to review the legality of that information order, that is, to ensure that the requested information by the French authorities was not manifestly devoid of any foreseeable relevance.

In the subsequent Grand Chamber judgment, État luxembourgeois v B and others, the referred question revolved around the possibility for the information holder, the taxpayer, and third parties to challenge directly the information order itself, prior to the imposition of a penalty for non-compliance. In agreement with Berlioz, the information holder should be granted this possibility under Article 47, otherwise, he would have to first infringe the law and then be able to challenge the information order in the context of the appeal against the penalty decision. Such a requirement, in the Court’s view, did not meet the essence of the right to an effective remedy. This line of reasoning was not, however, followed in the case of the taxpayer. Despite AG Kokott’s favourable opinion, the Court ruled that, in the case of the taxpayer,  an indirect remedy would suffice to satisfy the essence of the right enshrined in Article 47. This was premised on the fact that the taxpayer was not susceptible to a penalty for non-compliance (as opposed to the information holder), and thus she was not obliged to first infringe the law to be able to challenge the order. Instead, she could challenge the information order indirectly in the context of a correction or adjustment decision, if one was issued. The same logic applied in the case of the third parties concerned, notably the companies owned by the taxpayer; their right to an effective remedy would be satisfied if they could bring an action for damages.

The saga of the Luxembourg references to the CJEU continued with the État luxembourgeois v L case. The judgment concerned not only the clarification of foreseeable relevance in the context of EU law but also whether Article 47 of the Charter guaranteed that minimum information must communicated to the right holder in order to assess the information request’s legality. In line with the Berlioz judgment, the Court confirmed that for the right holder to be able to demonstrate in court that the information request is not foreseeably relevant (in light of Article 20(2) DAC 1), the information order addressed to them should be duly reasoned. Accordingly, in addition to being able to challenge the information order directly, the information holder should also have access to this minimum information in the information order so that they can decide whether to challenge it or not.

3.    Indirect taxation case law

Most judgments in VAT law and Article 47 of the Charter concern the compatibility of the collection and use of evidence by the tax authorities to prove VAT fraud and the taxpayer’s participation in the procedure. These cases often intersect with criminal law due to the severity of the VAT offences. As EU law does not provide for specific rules relating to the procedure for obtaining and using evidence in VAT-related criminal proceedings, these actions fall, in principle, within the competence of the Member States. In these cases, the taxpayer sought effective judicial protection for the investigative part of the procedure because the obtention of evidence either took place without the knowledge of the taxpayer or unlawfully, notably in breach of domestic law(s) or in violation of the taxpayer’s fundamental rights of respect for private and family life and personal data protection.

One such case was WebMindLicences (WML). The case concerned a taxpayer, WML against whom the Hungarian tax authorities made several tax adjustments (including in the payment of VAT). These adjustments were based on evidence obtained without the knowledge of WML, in the context of a criminal proceeding that had not yet been concluded. In addition to the question of whether the use of this evidence was compatible with the relevant provisions of the Charter (Articles 7, 8 and 52), the referring court also asked whether Article 47 required the administrative court responsible for hearing the action against the adjustment decision, to review the legality of the obtention of the evidence under these particular circumstances (no knowledge of the taxpayer and, thus, no possibility to contest the evidence before a court). Indeed, the Court held that the requirement of effective judicial protection would be satisfied if the court hearing the VAT adjustment decision could check that the evidence upon which that decision was founded was obtained in that criminal procedure in accordance with the rights guaranteed by EU law. If obtaining the evidence happened contrary to EU law, then this evidence should be disregarded and the contested decision should be annulled if, as a result, the decision had no basis.

Similarly, in Dzivev, the Court repeated that the penalties and the relevant procedures to counter infringements of the harmonized VAT rules remain within the Member States’ procedural and institutional autonomy which is limited by the principles of equivalence and effectiveness and which must be compliant with the proportionality principle. In addition to these limitations, national courts are, according to the CJEU, obliged to observe the fundamental rights guaranteed by the Charter and the general principles of EU law, which in criminal law must be respected also during preliminary investigation stage.

4.    Conclusions

The Åkerberg Fransson judgment paved the way for an easier application of the Charter in VAT-related cases. Because of the qualification of many VAT offences as crimes, the CJEU has ensured Article 47’s applicability also in the preliminary investigation of the procedure. The intersection of VAT law with criminal law has resulted in increased judicial protection for the taxpayer when tax authorities obtain evidence unlawfully or not in compliance with the taxpayers’ rights to privacy and data protection. This protection has been moderated in AG Kokott’s opinion in IN and JM v Belgische Staat, where the AG opined that Article 47 does not automatically prohibit the use of unlawfully obtained evidence, but instead the domestic court should assess the infringement ad hoc. Despite the, often, invoked need to protect the Union’s financial interests based on[GT4]  Article 325(1) TFEU, the taxpayers’ protection in VAT does not seem to give way to the protection of the Union’s own resources, either because no significant number of cases is affected, as the Taricco I condition provides, or because the relationship between the two is too remote.

In direct taxation, the applicability of the Charter in the administrative cooperation cases can finally be considered an acquis. The Court has been generous enough to provide the information holder with the right to an effective remedy in the context of the Berlioz and the État luxembourgeois v. B and others cases. It has not done the same for the taxpayer, in which case, the CJEU opted for a rather limited reading of the essence of the right enshrined in Article 47. By considering that an indirect remedy in the context of an appeal against the adjustment decision (if there is one) satisfies the essence of the right, the Court has failed to effectively prevent the public authority’s interference with the taxpayer’s protection of personal data which took place already when the request of the personal data was made. It is hoped that the CJEU will have an opportunity to amend this finding soon.

The different intersections of VAT law and criminal law, the different degrees of harmonization in the two ‘tax areas’, the need to protect the financial interests of the Union as in Article 325(1) TFEU, and the anti-tax avoidance agenda promoted by all EU institutions, not only hamper the establishment of clear patterns but they have also created discrepancies in the taxpayers’ effective judicial protection depending on whether the case falls in the VAT or the administrative cooperation realm. 

Posted by Dr Katerina Pantazatou (University of Luxembourg)

Suggested citation: K Pantazatou, “The role of Article 47 of the EU Charter of Fundamental Rights in direct and indirect tax cases: Parallel or divergent ways?”,, available at