2.1 The right to a fair trial on tax matters

Regarding the first question, it can be stated, on the one hand, that tax matters, considered in themselves, are excluded from the scope of application of the ECHR, so tax disputes fall outside the scope of Article 6. However, the ECtHR has analysed the application of the right to a fair trial in relation to certain tax aspects, relating them to civil rights or criminal law.

From the civil rights perspective, the right to a fair trial has been recognized in proceedings related to the Revenue’s right of pre-emption,¹³ to tax collection proceeding,¹⁴ to restitution proceeding (to attain restitution of monies paid under invalidated tax provisions)¹⁵ or to the proceeding related to the regularity of home visits and seizures by the tax administration.¹⁶

From the second perspective –criminal law-, it must be pointed out that the ECtHR has recognized the application of Article 6 by attributing to tax sanctions a criminal nature¹⁷ and also to tax surcharges, when they do not have a compensatory nature.¹⁸

However, as we have stated elsewhere,¹⁹ this could not prevent the jurisprudential doctrine elaborated in the European Convention of Human Right on the effectiveness and extension of the right to a fair trial, when EU law is being applied, from being used to the tax matters. Since the EUCJ in assessing this fundamental right is not limited ratione materiae by the wording of Article 6 ECHR.

After the entry into force of the European Charter of Fundamental Rights (CFREU), the application of this right to a fair process to tax matters can be firmly affirmed. Consequently, the first issue raised by the doctrine is no longer relevant when EU law is being applied, either by its institutions or by the Member States.

Article 47 CFREU regulates the «Right to an effective remedy and to a fair trial».

«Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article.²⁰

Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law. Everyone shall have the possibility of being advised, defended and represented.²¹

Legal aid shall be made available to those who lack sufficient resources insofar as such aid is necessary to ensure effective access to justice».

The explanations²² relating to the CFREU indicate that the Court of Justice enshrined that right in its judgment of 15 May 1986 as a general principle of Union law (Case 222/84 Johnston), According to the EUCJ, that general principle applies to the institutions of the EU and the Members States when they are implementing Union law», and regarding Article 47 (2) that «in Union law, the right to a fair hearing is not confined to disputes relating to civil law rights and obligations. That is one of the consequences of the fact that the Union is a community based on the rule of law». However, as the explanations clarifies «in all respects other than their scope, the guarantees afforded by the ECHR apply in a similar way to the Union».

Although not specifically mentioned in Article 6 ECHR, the right to remain silent and the privilege against self-incrimination form part of the heart of the notion of a fair trial under Article 6(1). The right not to incriminate oneself, in particular, presupposes that the authorities seek to prove their case without resorting to evidence obtained through methods of coercion or oppression in defiance of the will of the “person charged”. By providing the accused with protection against improper compulsion by the authorities these immunities contribute to avoiding miscarriages of justice and securing the aims of Article 6. Thus, it was that the Court found Article 6.1 to have been violated by the bringing of a prosecution with a view to obtaining incriminating documents from the accused himself;²³ the use of incriminating evidence secured from the accused himself by inspectors using powers of compulsion.²⁴

Recently, the ECtHR in the Van Veerlet case,²⁵ related to the use of tax information received from a spontaneous exchange of information for criminals proceedings, considered that said exchange does not constitute a violation of the right to a fair trial, as long as the information exchanged, provided in compliance with the duty of collaboration with the Tax Administration for purposes of levying tax, don't be used for the imposition of fines or the prosecution of crimes.

From the opposite perspective, the EUCJ has ruled in the WebMindLicenses case on whether tax authorities can, in order to establish the existence of an abusive practice concerning VAT, to use evidence obtained without the taxpayer knowledge in the context of a parallel criminal procedure that has not yet been concluded, by means, for example, of the interception of telecommunications and seizure of emails. From the perspective of Article 47 CFREU, the EUCJ established that such use would not be contrary to the right to a fair trial, provided that the right to effective judicial remedy is complied with. This «requirement is satisfied if the court hearing an action challenging the decision of the tax authorities adjusting VAT is empowered to check that the evidence upon which that decision is founded, deriving from a parallel criminal procedure that has not yet been concluded, was obtained in that criminal procedure in accordance with the rights guaranteed by EU law or can at least satisfy itself, on the basis of a review already carried out by a criminal court in an inter partes procedure, that that evidence was obtained in accordance with EU law²⁶». If this requirement is not met, such evidence, obtained in a criminal proceeding and used in an administrative proceeding, should be inadmissible and the decision of tax authorities annulled accordingly.

In the same way, in the Glencore case the Advocate General Bobek has considered in accordance with article 47 the fact of being able to use in a subsequent proceedings the evidence that has been obtained in the context of administrative or criminal procedures carried out against a third party, with whom the taxable person has had a relationship.²⁷ This will be the case, as long as the court can review all elements of fact and law, including the lawfulness of the manner in which the evidence was collected, irrespective of the origin of such evidence,²⁸ penal procedures or administrative proceedings.

The right to a fair trial requires the court to have unlimited jurisdictional competence, so that the court can know the proceedings previously carried out to obtain information in a tax procedure so that its use and effectiveness can be assessed from the perspective of this right in criminal proceedings, or vice versa, with the aim of safeguarding the rights of individuals. Furthermore, in the absence of an EU regulation on evidence, the taking of evidence must be carried out in accordance with national law; however, the national rules on the collection of evidence must not undermine the effectiveness of EU law and must respect the rights guaranteed by the Charter.²⁹

In addition, it may be noted that the right to a fair trial, ultimately the right of defence, may impede the provision of mutual tax assistance thereby limiting the effectiveness of the principle of mutual trust that inspires it. In relation to Directive 2010/24/EU, the EUCJ³⁰ has considered that Article 47 CFREU allows for the refusal to provide mutual tax assistance, when on the ground that the decision imposing the fine was not properly notified to the person concerned before the request for recovery was made to that authority pursuant to that directive. All this is without assessing, on the part of the requested Member State, the legality of the instrument permitting its enforcement and without the individual's claim in the requested State can being rejected outright on the ground that the matter should have been challenged before the requesting State.³¹

2.2 The application of the right to a fair trial on tax proceedings

It is now necessary to analyze the second of the questions raised by the doctrine on the effectiveness of Article 6 ECHR, regarding the possibility of applying the right to a fair trial to pre-trial administrative proceedings, and therefore also to tax proceedings. The ECtHR has ruled on this possibility, in tax matters that, under Article 6, had been considered a question relating to criminal law or to civil rights.

From the scope of article 6 ECHR under its criminal head. It is clear that the right to a fair trial, and all the guarantees and principles that inform it, have their scope of natural application within the framework of a judicial process. However, the ECtHR, initially, allowed its extension to sanctioning tax proceedings, to which, during its performance, it is extended such guarantees and principles that inform the right to a fair process: the principles of equality of arms and the right to adversarial proceedings.

For the purposes of our presentation, the doctrine of the European Commission on Human Rights, in the Miailhe case (2), is essential.³² The applicant complains that he was not given access to all the documents supplied by the Philippine Tax authorities within the framework of the mutual assistance provisions of the Convention concluded between France and the Philippines on 9 January 1976. This constitutes a violation of the principle of equality of arms during the “administrative” stage of the proceedings, because it was impossible for him to have access to all the documents of which originals were seized by the customs service and communicated to the tax authorities, to enable him to organise his defence. Also the applicant complains of a violation of the rights of the defence at the judicial stage of the proceedings, since the tax authorities did not, as fairness required, produce at the hearings all the documents which had been passed on to them by the Philippine tax authorities, but only those which were likely to support the authorities’ case.

In order to defend the importance of administrative action in relation to the right to a fair trial, and the consequent anticipation of its guarantees to fiscal procedure, the Commission develops the following arguments:

• The Commission recalls that, for article 6 to apply, the authority before which the proceedings take place must have the power to determine the dispute, this condition excludes bodies which are merely empowered to tender advice.³³

• However the Court recognises that “demands of flexibility and efficiency may justify the prior intervention of administrative bodies and, a fortiori, of judicial bodies which do not satisfy the requirements (of Article 6 of the Convention) in every respect” and that tribunals need not meet all the requirements of Article 6 at all stages of their proceedings.³⁴

• In any case, the Commission recalls that, while the primary purpose of article 6 as far as criminal matters are concerned is to ensure a fair trial by a tribunal competent to determinate the charge, it does not follow that the Article has no application to pre-trial proceedings. The requirements of Article 6 may therefore become operative before the case is submitted to the court, whether and in so far as the initial failure to observe them poses a serious threat to the fairness of the proceedings.

The Commission therefore declares that Article 6 can apply to the procedural stage before the Tax Administration and considers that Article 6 — principle of equality of arms and the right of defence — has been violated.³⁵

Therefore, this right can be applied in the previous administrative phases, but we must ask ourselves what consequences has its violation or nonobservance in these phases.

This argument of the Commission was not totally rejected by the Court,³⁶ although the result of its judgment is contrary to that reached by the Commission. In fact, the Court concludes that there is no violation of article 6 ECHR, because to see if the result of this precept has been achieved — the fair process — we must take into account all the processes related to the case as a whole.³⁷ In the present case, the Court considers that the set of processes was of a fair character.³⁸

So, the ECtHR does not disavow the Commission in its assertion of the violation of the equality of arms and the principle of the contradictory, in the administrative stage, nor denies the importance of their respect in that phase, but the Court integrates them from a global perspective. In conclusion, it can be said that in tax proceedings that lead to a criminal process, the principles of equality of arms and the right to adversarial proceedings are applied, as an expression of the right to a fair process.

In support of this thesis can be brought up the decision of the ECtHR in the Georgiou³⁹ case, in which the court decided to apply Article 6 to the tax assessment. Since tax assessments can be considered “criminal charges” for the purposes of the guarantees of Article 6, because the penalty procedures rely on the assessments for their validity, it would be wrong not to look at the proceedings as a whole. The Court accepts that it is not possible, given the various matters which were being determined by the VAT tribunal, to separate those parts of the proceedings which determined a “criminal charge” from those parts which did not. It will consider the proceedings to the extent to which they determined a “criminal charge” against the applicants, although that consideration will necessarily involve the “pure” tax assessments to a certain extent.⁴⁰

From the scope of the article 6 ECHR under its civil head. The ECtHR in the Hentrich case considers that the requirements of the right to a fair process of article 6, like «equality of arms» must be applied in the previous administrative procedure, because its infringement by the tax administration in the administrative procedure, cannot always be amended in a subsequent judicial process.⁴¹

The ECtHR also has considered that in order to comply with the requirement of a reasonable time laid down in Article 6 ECHR, the overall duration of administrative and judicial proceedings must be taken into account. Thus, the ECtHR⁴² ruled that, even taken into account the complexity of the case from a legal point of view, the length of the proceedings (before the domestic authorities and courts) as a whole was excessive and failed to meet the reasonable time requirement. There has therefore been a breach of Article 6(1) of the Convention on account of the length of the proceedings.

In the Ravon⁴³ case the ECtHR considers that the right to a fair process of article 6 ECHR has been violated, although the tax administration has been legally authorized by a judge to enter the domicile of a taxpayer — which constitutes a guarantee for ensuring the preservation of the rights contained in article 8 ECHR⁴⁴ — , when the person concerned, who ignores the existence of a procedure against it, has not been able to be heard, or not has been allowed to review of the measures taken by the administration on the basis of judicial authorization. In addition, the ECtHR has considered that the existing remedies, which are aimed at obtaining compensation of damage caused during a home visit, are not in line with the requirements of the right to a fair trial. This right requires a «check of the regularity of the decision prescribing it and the measures taken on its basis, so that, it cannot be considered as “effective judicial review” required».

From the previous exposition, we can anticipate two conclusions. The first is that from both the civil and criminal perspective of Article 6 ECHR, it turns out that the application to a tax procedure of the guarantees of the right to a fair trial is necessary, in accordance with the case law of the ECtHR, when these cannot be guaranteed throughout the judicial process. The second is that the anticipation to tax proceedings of the guarantees that make up the right to a fair trial, when EU law is applied, would not be conditioned to the fact that the tax issue was linked to a civil or criminal matter, since tax matters, in themselves considered, are not excluded from the jurisdiction of the EUCJ.⁴⁵ Moreover, this conclusion is reaffirmed by the recognition in the EU of a “right to good administration”, which applies to EU bodies, or of the «general principle of the good administration» and the «general principle of respect for the rights of defence», which apply both to EU bodies and to Member Estates when they apply EU law.

2.3 Leading case Berlioz

A pronouncement of the EUCJ essential to the object of our study is the Berlioz case, where the exchange of tax information is analyzed under the prism of the right to a fair trial.

In the Berlioz case,⁴⁶ the dispute in the main proceedings concerns a measure penalizing a third party (Berlioz, Luxembourger company) for failing to comply with a decision directing it to provide the requested authority (Luxembourger Tax Administration) with information on a taxpayer (Cofima, French company, Berlioz’s subsidiary) to enable that authority to respond to a request made by the requesting authority (French Tax Administration) on the basis, in particular, of Directive 2011/16/EU.

Berlioz refuses to supply all the information requested on the ground that that information was not foreseeably relevant, within the meaning of the Directive 2011/16/EU, in relation to the matter to be verified by the authority of the requesting State. Consequently, a penalty was imposed on it by Luxembourg Tax authorities. This sanction was appealed, asking the Administrative Tribunal to determine whether the information injunction was well founded. The Tribunal merely reduced the penalty imposed but dismissed the remainder of the appeal. Berlioz lodged an appeal before the Administrative Court maintaining that the refusal of the Administrative Tribunal to determine whether the injunction was well founded constituted a breach of its right to an effective judicial remedy as guaranteed by Article 6 ECHR.

The EUCJ considers that although the Directive 2011/16/EU does not confer any rights on individuals, this circumstance does not prevent an individual from being able to defend his case before a court, in accordance with Article 47 CFREU within the framework of the application of the Directive. The protection of this Article can be invoked by an individual in respect of a measure adversely affecting him such as the information injunction and the penalty⁴⁷ at issue in the main proceedings. The EUCJ concludes that the individual, who has been fined for failing to comply with the information injunction issued under the Directive 2011/16/EU, is entitled to challenge the legality of this information injunction.

Given the previous described situation, a question arises: the protection of Article 47 of the Charter is only applicable when a sanction is challenged. In fact, this question has sense because the Court has considered not only the sanction, but also the information injunction like measures that adversely affecting Berlioz.

In this regard, Advocate General Kokott also gave his opinion in the Sabou case. Although it was nevertheless considered that the request for information under Directive 77/799, being part of the investigation phase in respect of a taxpayer, did not give rise to a right to be heard. This did not entail any loss of guarantees for the taxpayer, as he could exercise his right before the authorities of the requesting State, at the contradictory stage, and subsequently before the courts of that State.

However, it would be difficult to place Berlioz in Sabou's position. It can hardly be considered, under Directive 2011/16/EU, that a request for information to a third party regarding a taxpayer constitutes, in relation to the requested third party, an action within the inspection phase. In addition, it can hardly be considered that the third party can exercise its rights in the contentious phase before the authority of the requesting State.⁴⁸

It could therefore be concluded that, in the Berlioz case, the circumstances limiting the right of defence in the Sabou case do not exist, and therefore such a right must be recognised, irrespective of the possibility of challenging a sanction before the requested State, which is the State which applies EU law to the requested third party.

On the other hand, if the Berlioz judgment sought to recognise access to the protection of Article 47 CFREU only to third parties who have been penalised for not providing the information required, the requirement to challenge the sanction in order to delimit access to the protection of Article 47 is not an appropriate condition for making such a limitation effective.

In effect, it will suffice for the third party to fail to comply with the obligation to provide the information required, in order to obtain access to Article 47, either because such failure is sanctioned, or because the administration of the requested state deploys its powers to obtain the requested information from the third party, its exercise will involve interference in the private life of the third party — Article 8 ECHR and Articles 7 and 8 CFREU — and could therefore open access to a court, since, in my opinion, it would be difficult to consider it proportionate for the third party to be unaware of the reason for the request for information made by the requesting State and executed by the requested State.

From this perspective, it is absurd that the third party who is required to provide information on the taxpayer does not have the right to know the statement of reasons for the request for information. That is to say, is absurd that the third party does not have the right to know the statement of reasons, not only the legal basis, of an act that creates obligations for it, and yet, if the third party objects to providing the required information, it may have access to the statement of reasons of the request by virtue, ultimately, of Article 47 CFREU.

The legality of an information injunction addressed by a Member State to an individual is based on the «foreseeably relevant» of the requested information. Also, the «foreseeably relevant» of the requested information constitutes the condition that must be satisfy in order the requested Member state to be required to comply with that request.⁴⁹

The authority of the requesting Member State shall determine the foreseeable relevance of the requested information. Although the requesting authority has a discretion in that regard, it cannot request information that is of no relevance to the investigation concerned, because such a request would not comply with Articles 1 and 5 of Directive 2011/16/EU.

The review carried out by the requested authority is limited by that discretion of requesting authority. In any event, the requested authority cannot substitute the assessment made by the requesting authority of the possible usefulness of the information requested for its own assessment.

However, the requested authority must nevertheless check that the information requested is not devoid of any foreseeable relevance to the investigation being carried out by the requesting authority, accordingly the verification by the requested authority is not limited to a brief and formal verification of the regularity of the request of information.⁵⁰

The information to be provided by the requesting authority in the standard form⁵¹ plays an important role in this verification, as does the adequate statement of reasons explaining the purpose of the information sought and as well as the possibility for the requested authority to request additional information.

In these circumstances, the judge's control cannot only be aimed at the proportionality of the sanction, but also at the legality of the information injunction. To that end, Article 47 requires that the reasons given by the requesting authority must allow the national judge to exercise control over the legality of the request for information, however, it must be held that the limits that apply in respect of the requested authority’s review are equally applicable to reviews carried out by the courts.

However, in order for such judicial control to be effective, the court must have access to the request for information and additional information obtained by the authority of the requested State. Though, the individual's access to such information is limited by its secrecy, in order not to undermine the effectiveness of the investigation. In this case, and in accordance with his rights of defence, it is considered sufficient, in principle, that the individual has access to the minimum information referred to Article 20(2) of the Directive. Nevertheless, if the court considers that this minimum is not enough, it may provide the individual with additional information obtained by the authority of the requested State, taking due account the possible confidentiality of some of these additional data.⁵²

Therefore, the foreseeable tax relevance of the request for tax information constitutes a requirement for the validity of the actions carried out by the requested State. Compliance with this requirement, with the limitations indicated above, must be verified by the administrative and, where appropriate, judicial authorities of the requested State regardless of whether or not a tax sanction exists. This opens up a way, not so exceptional, to limit, from the respect and safeguarding of the EU's right of defence, the principle of mutual trust that governs the provision of mutual tax assistance.

3.1 The general principle of good administration or the right to good administration

The right to good administration is regulated in Article 41 CFREU and states that:

«1. Every person has the right to have his or her affairs handled impartially, fairly and within a reasonable time by the institutions, bodies, offices and agencies of the Union.

2. This right includes:

(a)the right of every person to be heard, before any individual measure which would affect him or her adversely is taken;

(b)the right of every person to have access to his or her file, while respecting the legitimate interests of confidentiality and of professional and business secrecy;

(c)the obligation of the administration to give reasons for its decisions.

3. Every person has the right to have the Union make good any damage caused by its institutions or by its servants in the performance of their duties, in accordance with the general principles common to the laws of the Member States.

4. Every person may write to the institutions of the Union in one of the languages of the Treaties and must have an answer in the same language.»

This right does not originate in the European Convention of Human Rights. This Article is based on the fact that the Union is a community subject to the rule of law. Therefore, the extent and the characteristics of the right to good administration were developed in the case law which enshrined good administration as a general principle of law.

This principle was introduced by the jurisprudence of the EUCJ from the expression of the maladministration of Article 195.1 TEC (ex Article138 E) concerning the Ombudsman.

The right to good administration, includes a right of individuals and rules that should inspire the actions of the institutions, bodies and offices and agencies of the EU in their actions.

Indeed, the case law of the EUCJ had considered that «where the Community institutions have a wide power of appraisal, respect for the rights guaranteed by the Community legal order in administrative procedures is of even more fundamental importance. Those guarantees include, in particular, the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case, the right of the person concerned to make his views known and to have an adequately reasoned decision. Only in this way can the Court verify whether the factual and legal elements upon which the exercise of the power of appraisal depends were present⁵³».

Although the right to good administration (Article 41 CFREU) owes its origin and content to the general principle of good administration. However, they have different scope, as Article 41 of the Charter governing the right to good administration does not apply to Member States,⁵⁴ whereas the principle of good administration must be respected by Member States when implementing EU law.

If the content of Article 41 is analysed, it is clear that the different rights listed in article 41 paragraph 2 also reflect specific general principles and rights of EU law, like the general principles of respect for the rights of the defence, including the right to be heard, or the duty to state reasons. The differentiation between general principles of EU law and the fundamental rights of the European Charter is justified because the content of the right of defense, applied by the Member States «may differ from the specific and autonomous guarantees provided for in Article 41 of the Charter, which are applicable to the direct administration of the EU».⁵⁵ The principle of respect for the rights of defence is not absolute, it may be subject to limitations.⁵⁶

The right to good administration contains the right to a fair and impartial procedure and a procedure that has a reasonable duration. From this content can derive the obligation of the Administration to act with due diligence.⁵⁷

3.2 The statement of reasons

This right to good administration includes the obligation of the administration to give reasons for its decisions. This obligation in established in the article 296 Treaty of the Functioning of the European Union (ex art. 253 TCE). It is not necessary to emphasize the importance of the duty of the Administration to explain the reasons for its decisions, in relation to the right of defence. The EUCJ has consistently held, with regard to the statement of reasons required by this article that «the statement of reasons must disclose in a clear and unequivocable fashion the reasoning followed by the Community authority which adopted the measure in question in such a way as to make the persons concerned aware of the reasons and thus enable them to defend their rights and to enable the Court to exercise its supervisory jurisdiction».⁵⁸

The EUCJ has stated, in relation to the investigation proceedings, that the indication of its subject-matter and its purpose «constitutes a fundamental guarantee of the right of defence». Therefore, «the scope of the obligation to establish the reasons on which the decisions ordering the investigations are based cannot be restricted on the basis of considerations regarding the effectiveness of the investigation. Although the Commission is not required to communicate to the addressee of a decision ordering an investigation all the information at its disposal concerning the presumed infringements, or to make a precise legal analysis of those infringements, it must none the less clearly indicate the presumed facts which it intends to investigate».⁵⁹

In this sense, the Berlioz judgment has made clear the importance of the statement of reasons by the requesting State to request information, in order to demonstrate the foreseeable relevance of the information requested from the requested State.⁶⁰

3.3 The right to access to one’s file and the right to be heard

The right to good administration includes the right of every person to have access to his or her file, without prejudice to the more general right of access to documents,⁶¹ as a requirement of the principle of transparency that governs the public action of the EU, is recognized as piece of the statute of the interested party in a procedure. In fact, the right to access the file is instrumental to the exercise of the rights of defence of persons whose interests may be affected by the adoption of a decision of the public authorities.⁶²

The EUCJ case law on competition, referred to Article 101 TFEU (ex art.81 TEC), has recognized that the right of access to the file, is a fundamental content of the right to defense and involves, within this administrative procedure, that the parties concerned should be put in a position before the decision is issued to present their observations on the complaints which the Commission considers must be upheld against them».⁶³ For that purpose, they must be informed of the facts upon which these complaints are based, but it is not necessary communicate to them the entire content of the file.

In this sense, «access to file as such, understood as the complete set of documents and information in possession of the administrative authorities, should be clearly distinguished from the right to have access to the documents upon which the final administrative decision is based».⁶⁴In accordance with the principle of respect for the rights of defence, «the addressees of decisions which significantly affect their interests must be placed in a position in which they can effectively make known their views as regards the information on which the authorities intend to base their decision».⁶⁵

The right of access to the file implies «that the taxable person must be able to examine all the documents in the investigation file that are relevant for the exercise of his defence»,⁶⁶ more specifically, first «the elements of the file which the authorities intend to rely on in their decision against the taxable person»; second «other documents which, although perhaps not directly relied on by the authorities in the statement of reason of their decision, concern the taxable person’s conduct that is the subject of the investigation»;⁶⁷ third, «not only incriminating evidence, but also exculpatory evidence which may have been collected by the tax authorities».⁶⁸

Therefore, the Advocate General Bobek considers that «there is no right to see the complete file, but rather to have access to the key information or documents which form the basis of the administrative decision».⁶⁹ Advocate General clarifies that there is no right to see the complete file if by that it meant «the complete set of documents and information in the possession of the administrative authorities including elements not directly relating to a decision adopted, such as some internal notes, drafts, auxiliary calculations, and all the information obtained from third parties».⁷⁰

Access to the file must be granted during the administrative procedure and in any case before the authorities take their final decision, and also before any judicial process begins.⁷¹ Access to the file at a later stage (within the judicial procedure) constitutes an infringement of the rights of the defence which cannot, as a rule, be remedied,⁷² unless the procedure initiated against the decision taken by the administration «has the effect of automatically suspending the execution of the adverse decision, rendering it immediately inoperative».⁷³

With regard to the time element which delimits the scope of the information, a distinction must be made between the investigation phase at which the information has been collected and the contradictory phase or «contentious stage, between the tax authorities and the taxpayer, which begins when the taxpayer is sent the proposed adjustment».⁷⁴ Thus, «to the extent that such documents do not form the basis of a decision, I do not see the obligation, as a matter of EU law, to give access to all the documents and information collected during the investigation phase, even if the information collected in that preliminary phase might have contributed to triggering the adoption of the proposed adjustment».⁷⁵

Finally, Advocate General Bobek affirm that there is not «a requirement to provide the pertinent documents or information ex officio».⁷⁶ So, the EUCJ concludes that «the general principle of EU law of respect for the rights of defence must be interpreted as a requirement that, in national administrative procedures of inspection and establishment of the basis for the assessment of value added tax, an individual is to have the opportunity to have communicated to him, at his request, the information and documents in the administrative file and considered by the public authority when it adopted its decision, unless objectives of public interest warrant restricting access to that information and those documents».⁷⁷

The EUCJ, in the WebMindLicenses⁷⁸ case, considered, under the right to defence as a general principle, that in order for evidence obtained in a criminal proceeding not yet concluded and unknown to the taxpayer, to can be used as the basis for the tax settlement, the taxpayer should have access to such evidences and have the opportunity to be heard in relation to it. If this requirement is not met, such evidence, obtained in a criminal proceeding and used in an administrative proceeding, should be inadmissible and the decision of tax authorities annulled accordingly.

The Advocate General makes the same pronouncement in the Glencore case when he considers that «the fact that certain documents are transferred from one procedure to another does not, per se, result a breach of the rights of defence of the taxable person being investigated in the latter procedure». However, if the tax administration intends to rely on such documents in a later decision, the tax administration must «(i) grant access to those documents to the taxable person with regard those documents may be used as evidence in the subsequent decision; (ii) give that taxable person the possibility to be heard with regard to those documents and to submit evidence in support of his arguments; (iii) expressly reconcile the relevant documents and their pertinence in its decision, incorporating, responding to, or refuting the taxable person’s relevant arguments in its decision. That is so regardless of whether those documents already formed the basis of a previous decision that has become definitive in the meantime».⁷⁹

The principle of respect for the rights of defence, particularly, the right of every person to be heard before the adoption of an adverse individual measure is violated even though the individuals can express their views during a subsequent administrative objection stage, if national legislation does not allow the addressees of such demands, in the absence of the prior hearing, to obtain suspension of their implementation until their possible amendment.⁸⁰

The right to good administration also includes «the right of every person to be heard, before any individual measure which would affect him or her adversely is taken», or the adversarial principle. This principle also is integrated in the right of defence.

Initially, this principle was recognized, in the field of competition law, in a restrictive manner and limited to administrative sanctioning procedures.⁸¹ Subsequently the scope of application of this principle is generalized. First, this right was extended to the previous phases of investigation of such sanctioning administrative procedures. Therefore, from the stage of preliminary inquiry, must be respected the right to legal representation and the privileged nature of the correspondence between the lawyer and the client,⁸² as well as the right, on one hand, to be informed about the purposes pursued and the legal basis of the request of information, and, on the other, that the information thus obtained not subsequently be used outside the legal context in which the request was made.⁸³ In second place, now, for this principle to apply, it is only necessary that an unfavorable or harmful consequence to a person occurs. And finally, the right of defense, as the general principle of EU law, even in the absence of express provisions, must be observed,⁸⁴ and may be relied on directly by individuals before national courts.⁸⁵

The Jurisprudence of EUCJ has affirmed that for an infringement of the right of defence to result in an annulment it must, however, be established that, had it not been for that irregularity, the outcome of the procedure might have been different.⁸⁶

This jurisprudence has evolved favorably for the individual, considering that the infringement committed of the right of defense, is not remedied by the mere fact that access to the file was made possible during the judicial proceedings. This circumstance does not put back the individual into the situation in which it would have been if it had been able to rely on those documents in presenting its written and oral observations to the Administration in the administrative procedure. Therefore, the tardy knowledge of the file is not an adequate remedy for the infringement of the right of defence.

Consequently, the individual does not have to show that, if it had access to the file of the administrative decision would have been different in content, but only that the individual would have been able to use the file in its defence.⁸⁷

This last assertion has been made in the field of competition law, the question, therefore, is to what extent it can be applied in tax proceedings, due to the fact that «the nature of the procedures is simply very different». Competition law imposes sanctions of a nature and degree that reach a quasi-criminal nature. By contrast, tax proceedings are aimed to ascertaining the amount of the tax due.⁸⁸

From the above, two conclusions can be drawn. The first conclusion is that these legal consequences are applicable to sanctioning administrative procedures,⁸⁹ and therefore, they should be observed in tax procedures that impose sanctions. The case law of the Court confirm that the assessment of whether an infringement of the rights of defence, including the right of access to file, has occurred in a particular case ought to be made having regard not only to the specific circumstances at issue, but also the nature of the act concerned and the legal rules governing the matter in question.⁹⁰ This means that the different requirements that arise from the principle of respect for the rights of defense and the consequences arising from its violation may vary depending on the elements previously referred to.

The second conclusion, once delimited the scope of application of such legal consequences, is that the right of defence within the EU law is not only integrated in the judicial processes, but it is a right that protects the individual in administrative procedures, and that right cannot always be repaired in the subsequent judicial phase.

From this perspective, the position of the ECtHR, analyzed when exposing the right to a fair process is overcome. As we have seen, the ECtHR, in proceedings of a sanctioning nature, from a global perspective, recognized that during the jurisdictional phase the possible damage to the right of defense that occurred during the administrative procedure could be remedied.

3.4 Leading case Sabou

The EUCJ in the Sabou⁹¹ case concentrates on the analysis of the effectiveness and scope of the right to be heard regulated in Czech law in relation to the exchange of tax information regulated by EU law. Mr Sabou claimed that the Czech tax authorities had obtained information about him illegally. First, they had not informed him of their request for assistance to other authorities, so that he had not been able to take part in formulating the questions addressed to those authorities. Secondly, he had not been invited to take part in the examination of witnesses in other Member States, in contrast to the rights he enjoys under Czech law in similar domestic proceedings. The Czech Supreme Administrative Court refer the following questions to the EUCJ for a preliminary ruling:

• Does the taxpayer have the right to be informed of a decision of the tax authorities to make a request for information in accordance with Directive 77/799/EEC? Does the taxpayer have the right to take part in formulating such request?

• Does a taxpayer have the right to take part in the examination of witnesses in the requested Member State? Is the requested Member State obliged to inform the taxpayer beforehand of when the witness will be examined, if it has been requested to do so by the requesting Member State?

• Must the information provided observe a certain minimum content, so that it is clear from what sources and by what method the requested authorities have obtained such information? Can the taxpayer challenge the accuracy of the information obtained by the requesting tax authorities, for example on grounds of procedural defects of the proceedings in the requested State?

The court focuses its analysis on the general principle of respect for the rights of defence, which includes the right to be heard. The court ignores the application of Article 41 CFREU, the right to good administration, because the European Charter was not in force when the question was referred for a preliminary ruling. In any case, Article 41 would not have been applicable because this right only applies to EU bodies, and not to States, according to the majority opinion of the Court. However, the right of defence, as a general principle of EU law, even in the absence of express provisions, must be respected and guaranteed, when EU law is applied, both by EU bodies and by Member States.⁹² In this regard the Court has pointed out that «Subject to the observance of Community law, and in particular its fundamental principles, it is therefore a matter for national law to define the appropriate procedural rules in order to guarantee the rights of the defence of the persons concerned. Such guarantees may differ from those which apply in Community proceedings».⁹³

Finally, we must point out that the right to be heard is not absolute where the recognition of the right in question implies or may imply the failure of the purpose of the administrative measure.⁹⁴

From this perspective — to determine whether the taxpayer has a right to be informed of the request for exchange of information, whether the taxpayer has a right to participate in the formulation of this request for information, whether the taxpayer has a right to participate in the hearing of witnesses in the requested State or whether that State has an obligation to inform the taxpayer in advance of the date of the hearing — the approach adopted by the Advocate General and the Court of Justice is correct when they ask themselves whether the implementation of the Czech State in requesting an exchange of tax information presupposes, first, that Mr Sabou be regarded as the addressee of that injunction, or not, and, second, that it has an adverse effect, or not, on Mr Sabou, circumstances which, in their case, would make it possible to implement the right to be heard.

It must be pointed out from the rules of European Union law that it is limited to regulating relations between Member States, so that the recipient of the exchange of information will necessarily be another State. It is possible, however, to consider that the result of this request for exchange of information may indirectly have legal effects for the taxable person and, in this regard, be detrimental to him.

Indeed, the right to be heard does not exist for all decisions of an authority, but only for decisions which are «onerous in character», in other words, measures that «adversely affecting» a person or decisions that «significantly affect» a person's «interests». Consequently, the question is whether a request for information under Article 2 of the Mutual Assistance Directive constitutes such a decision. The Advocate General Kokott considers that «the decision on a request for information under Article 2 of the Mutual Assistance Directive can have indirect legal effects on the taxpayer and thus be onerous», but also, considers that this decision «may not be seen in isolation», because this decision «constitutes an investigate measure in administrative proceedings culminating in a payment notice».⁹⁵

The question would therefore be whether these negative effects are so serious as to require compliance with the right to be heard during the course of the whole activity covered by the exchange of information. It should not be forgotten that the purpose of the exchange of information is simply to help the conduct of an investigation, in other words, to prepare the content of a tax decision that has legal effects on the taxpayer.

The EUCJ and the Advocate General rightly consider that investigation stage, during which information is collected and which includes the exchange of information between the requesting and the requested State, must be distinguished from the contentious stage, between the tax authorities and the taxpayer, which begins when the taxpayer is sent the proposed adjustment. The protection of the taxpayer is guaranteed by the fact that the person concerned is heard before the decision is taken at the end of the administrative procedure, and therefore it must be guaranteed in the requesting State.⁹⁶ This second stage «necessarily entails, for the taxpayer, respect for certain rights, including the right to challenge any final decision before a tribunal».⁹⁷

Accordingly, the EUJC considers that «the fundamental right to be heard, must be interpreted as not conferring on a taxpayer of a Member State either the right to be informed of a request for assistance from that Member State addressed to another Member State, in particular in order to verify the information provided by that taxpayer in his income tax return, or the right to take part in formulating the request addressed to the requested Member State, or the right to take part in examinations of witnesses organized by the requested Member State».⁹⁸ Although, «there is nothing to prevent a Member State from extending the right to be heard to other parts of the investigation stage».⁹⁹

When the tax inspection is carried out exclusively on data submitted by the taxpayer it is clear that the right of defence does not require the taxpayer to be heard. The solution should be the same, when using the exchange of information to investigate data of the taxpayer provided by third parties, or unknown data of the taxpayer, because it would be possible to exercise the right to be heard before the decision is taken at the end of the tax proceedings.

The Sabou judgment also raises the question of whether the requested State has a duty to apply, within its territory, the procedural rights and guarantees established by the requesting State. The Advocate General Kokott considers that «no such obligation for the requested Member State can be inferred directly from the Mutual Assistance Directive»¹⁰⁰ and affirms that «the inquiries made by the requested Member State are thus intended to be subject only to its national procedural law, from which the rights and obligations of the parties are derived».¹⁰¹

The conclusion cannot be different in the light of the principle of equivalence and the principle of acting on its own initiative. These principles, in my view, have been established to facilitate the exchange of information and its effectiveness. The second principle implies that it will be followed by the requested authority the same procedures as when it is acting on its own initiative or at the request of another authority in its own Member state. The principle of equivalence entails that the required Member State is not obliged to carry out enquiries or to communicate information, if it would be contrary to its legislation to conduct such inquiries or to collect the information requested for its own purposes.¹⁰²

In the EU law, when carrying out an exchange of information the limits established by the requesting State are not taken into consideration, unlike what happens at the international law. This shortcoming has not been resolved either in Directive 77/799/EEC or in Directive 2011/16/EU, so it can be concluded that this omission is the result of a legislative option to make the exchange of information efficient. Indeed, the reference to the law of the requested State made by EU law, by virtue of the principle of equivalence, leads to the limitation of the procedural autonomy of the requesting State.

The Sabou case focuses on a very relevant issue, the use by the requesting State of information obtained by the requested State, in accordance with its legal system but without respecting the rights and guarantees established by the requesting State, to whose respect the requested State is not bound.

The solution given at international law is not uniform, although it is generally accepted that the information exchanged must be in accordance with the conditions laid down by the requesting State, otherwise the taxpayer affected by the exchange may oppose it. In my opinion, the international solution cannot be applied to the exchange of tax information ruled by EU. A seemingly paradoxical solution is reached in the EU. The aim that this exchange of information is intended to achieve is not only an objective of the Member States, the correct application of the tax, but also an objective of the EU, the fight against tax evasion in order to achieve the proper functioning of the market.

The question is whether the requesting State should avoid using the information received, through the provisions of Union law, when the requested Member State has not respected the guarantees which requesting State's law gives to taxpayers or, in other perspective, whether the taxpayer can rely on such non-compliance before the judicial authority of the requesting State, in order to render the use of the information exchanged ineffective. In my opinion, neither the requesting State can ignore the information, nor can the taxpayer oppose its use in the courts for this reason. However, there should be no doubt that the taxpayer can challenge and discuss the effectiveness of the information exchanged with any other argument before the authority or courts of the requesting State.

However, this solution does not conflict with the proportionality approach taken by the ECtHR in the F.S. V Germany case, since in the Sabou case it is not a question of what information can be exchanged — in fact, the information declared by the taxpayer himself was being checked — but of how the information to be exchanged was obtained.

These different purposes, once the requested State in the exchange of information has respected the fundamental principles and rights of the EU, make the information obtained and exchanged fully effective in the requesting State. Since the fight against tax evasion and the proper functioning of the market cannot be conditioned by a state legal system, even if the latter provides for broader guarantees than those of the requested State which have been considered appropriate by EU law. The use of the information received from another Member State, whenever it has always respected the minimum standards of the EU's general principles and rights, must therefore be mandatory, because otherwise it would be like leaving the concrete achievement of a Union objective to the discretion of a Member State.

This is a solution that fits the so-called «better law» principle, which is the option adopted by the EU to define in the application of its fundamental rights and general principles, the content that best suits the achievement of the EU's objectives. This avoids that broader taxpayer protection could become an obstacle to the effectiveness of exchange of tax information in the EU.¹⁰³

Finally, with regard to the content of the information. Advocate General Kokott considers that «the requested Member State is obliged, in principle, under Article 1(1) and Article 2 of the Mutual Assistance Directive also to provide information about the inquiries on which the notified findings are based».¹⁰⁴ Clearly, this choice would increase the evidentiary value of the information exchanged and thus its effectiveness. From the taxpayer's perspective, this would mean strengthening the taxpayer's defence, and hence his rights. However, the Court of Justice does not share this view, stating that Directive 77/799/EEC «does not impose any particular obligation with regard to the content of the information conveyed».¹⁰⁵

4.1 Regulatory framework for the right to the protection of personal data in the EU

The right to the protection of personal data, within the scope of the Council of Europe and the jurisprudence of the ECtHR, has been located in art. 8 CEDH — the right to respect for private and family life —, as a consequence of the broad conception that ECtHR maintains of the concept of private life,¹⁰⁶ treating it as a more specific expression of the right to privacy in respect of the processing of personal data.

The regulation of this right in the Council of Europe was initially unitary, but the insufficiencies of Article 8 of the Convention to preserve individuals from the abuse of information technology led to the promulgation of Convention No. 108 for the protection of persons with respect to the automatic processing of personal data, 28 January 1981.¹⁰⁷

However, the regulation in the EU law of such rights is separate. Article 7 CFRUE regulates «the right to respect for private and family life», and Article 8 CFRUE regulates «the right to the protection of personal data».

From the above a question arises, is this interpretation of the ECtHR applicable in EU law, since, in this legal order there is a separate regulation of both rights?

The rights guaranteed in Article 7 of CFREU correspond to those guaranteed by article 8 ECHR. So, in accordance with Article 52 of CFREU the meaning and the scope of this right are the same as those of the corresponding article of the ECHR. It follows that the limitations which may legitimately be imposed on this right are the same as those allowed by Article 8 ECHR. According to the Article 52 of the Charter, where there is a correspondence between the rights of this and those of the ECHR, «EU law permits the Court of Justice to deviate from the case law of ECtHR only to extent that the former ascribes more extensive protection to specific fundamental rights than the latter»,¹⁰⁸ In other words, these rights, under EU Law, cannot have less protection than that established by the ECtHR case law.

The Article 8 CFREU has been based on Article 286 of Treaty establishing the European Community¹⁰⁹and the Directive 95/46/EC on the protection of individuals with regard to the processing of personal data and on the free movement of such data¹¹⁰ as well as on Article 8 ECHR and on the Council of Europe Convention of 28 January 1981. However, in this case, must be understand that this right is exercised under the conditions established by the Regulation (EU) 2016/679¹¹¹ and may be limited under the conditions established in Article 52 of the Charter, therefore, without any reference to the limitations provided by Article 8 ECHR. The explanations of the Charter consider this right different from the ones listed in the European Convention of Human Rights.¹¹²

However, it should be clarified that the scope of the fundamental right to data protection in Article 8 CRFEU is not affected by Article 2 of the Regulation (EU) 2016/679. This follows in particular from Article 51.1 CRFEU. This states that the fundamental rights guaranteed in the UE legal order apply in all situations governed by EU law. The CFREU is applicable to penalties in the area of taxation¹¹³ — however, the Regulation cannot be applied —, in so far as it relates to fiscal provisions of EU law.¹¹⁴ If the latter does not occur, Article 8 ECHR could become applicable.¹¹⁵

Despite this separate regulation of these rights in two articles of the European Charter, the reality of the analysis of the normative development in the EU of the right to the protection of personal data, that is, article 52 of the Charter and article 23 of Regulation (EU) No 2016/679, it is stated that the requirements established to limit this fundamental right correspond to those of article 8 ECHR. Similarly, from the analysis of the jurisprudence of the EUCJ on the right to the protection of personal data, it can be verified that the Court identifies, in their origin, both rights, the right to private life and the right to the protection of personal data, extending to the latter the jurisprudential doctrine of the ECtHR on Article 8 ECHR.

The protection afforded by the Regulation (EU) 2016/679 should apply to natural persons and to the processing of personal data by automated means, as well as to manual processing.¹¹⁶ From the perspective of the exchange of information, this means that the protection afforded by the Regulation should apply to all exchanges of information, i.e. exchange of information on request; automatic exchange of information and spontaneous exchange of information.

4.2 Right to privacy and the Right to «informational self-determination»

The right to respect for private and family life is not absolute, it may, therefore, suffer limitations. Any way these limitations must be interpreted restrictively because they affect a fundamental right. However, an interference in this right does not constitute a violation of Article 8 ECHR, as long as the interference «is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being for the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others».

The Commission¹¹⁷ has ruled on the possible violation of Article 8 ECHR, in a spontaneous exchange of tax information between Germany and the Netherlands, within the scope of Directive 77/779/EEC, on matters related to the assessment of taxes if there were reasons to assume that taxes were evaded in the Netherlands. This information was obtained legally in the context of a tax evasion procedure carried out against a third party. Consequently, without prior knowledge of the taxpayer that will be investigated in the Netherlands.

The Commission considers that the disclosure of tax information amounts to an interference with the right under Article 8.1 ECHR. Such interference violates Article 8, if it is not justified under paragraph 2 of Article 8 as being in accordance with law and necessary in a democratic society to achieve one of the aims mentioned therein. The Commission notes that the transmission of the information in question was based on the German law transposing Directive 77/779/EEC, confirming the concurrence of the principle of legality, therefore the interference is in accordance with German law. The Commission considers that «the measure in question was taken in the interest of the economic well-being of the country and also aimed at the prevention of crime». The Commission finally examines whether such interference was necessary in a democratic society to accomplish the said aim.

Consequently, the Commission determined that there were relevant reasons for the exchange of information — the taxpayer was evading taxes in the Netherlands and the correct assessment of taxes in the EC Members States- and concluded that the measures adopted were proportionate to the legitimate aims pursued, because the information exchanged, it was information that the taxpayer would have had to provide to the Dutch tax authorities.

It is interesting to note that proportionality, as a parameter of legitimate interference in a person's private life, displays its effectiveness, not in relation to the actions taken to obtain information by the requested State, nor as a limit on the use of the information by the requesting State. The effectiveness of proportionality determines the exchange or not of the information. This conclusion is important because the taxpayer may oppose the exchange of information obtained by the requested State acting on its own initiative, but which cannot be obtained in the requesting State.¹¹⁸

The ECtHR¹¹⁹ rules that disclosing banking information to tax authorities of another State through a bilateral agreement (US and Switzerland) constitutes an infringement of Article 8 but this infringement doesn’t constitute a violation of Article 8, because it meets the requirements of the second paragraph of the article. Indeed, the ECtHR affirms that the measure was «in accordance with the law», because is not contrary to this requirement that the retroactive application of the bilateral treaty was unforeseeable. Provisions on administrative cooperation, including those related to the exchange of information, are procedural in nature and, therefore, applied, in principle, to all current or future proceedings, including those related to any tax years pre-dating their adoption.¹²⁰

The ECtHR,¹²¹ also, accepts that the development of an inspection procedure, within the framework of a mutual assistance procedure of the Directive 77/779/EEC, and the exchange of tax information obtained in this procedure without the prior knowledge of the person investigated constitutes an interference of Article 8, but no a violation of right to privacy, because, the transposition of the Directive is an adequate legal basis for this interference. The ECtHR considers, regard to the right to be hearing, that the fact that the applicant is not the “taxpayer” and therefore is not directly concerned by the Sabou judgment,¹²² it cannot be decisive. Consequently, the ECtHR has accepted «in the context of “the interests of national security” and “public safety” and “the prevention of crime”, that investigative methods may have to be used covertly». The ECtHR «considers that the same applies in matters of taxation: it cannot be a requirement of Article 8 of the Convention that prior notice of lawful tax investigations or exchanges of tax-related information be given to all persons potentially implicated».

The EUCJ in the WebMindLicenses¹²³ case found that evidence obtained in a parallel criminal proceeding not yet been concluded, such as interceptions of communications or the seizure of emails, to be used in a tax proceeding, constitutes interferences with the right to privacy in article 7 CFREU. Such limitations are accordingly possible only if they are provided for by law and if, in observance of the principle of proportionality, they are necessary and genuinely meet objectives of general interest recognised by the EU.

The EUCJ considers that it should be examined, firstly, whether such interference was provided for by law and whether it was necessary in the framework of criminal proceedings¹²⁴ and, secondly, whether the use of such evidence by the Tax Administration for the assessment of the tax was provided for by law and whether it was necessary. It must be assessed in particular, whether the use of such evidence is proportionate to the aim pursued, examining whether all the necessary information could not have been obtained by means of investigation that interfere less with the right guaranteed by Article 7 CFREU. The EUCJ considers that a valid parameter to assess the proportionality of the interference in the right to private life of Article 7 CFREU is the exchange of information between Member States, i.e. in the present case, if under Regulation 904/2010¹²⁵ such information can be obtained.

In light of foregoing, it can be affirmed that although both rights are part of a whole — respect for private life -, nevertheless, it could be considered, from a negative perspective of limiting the interference of public powers in the private sphere of individuals, that Article 8 ECHR refers to the phase of obtaining information, while the right to the protection of personal data refers to the data held by the administration.

In the latter case, as it can see below, the legal regime provides for limits to the treatment of data by the administration and a set of rights for individuals affected by such treatment. This double perspective¹²⁶ integrates the content of what the doctrine has called the right to «informational self-determination».¹²⁷ Consequently, it can be concluded that the essential content of the right to «informational self-determination», unlike the right to privacy, is the set of faculties and rights that allow its owner effective control of his personal data treated. This set of guarantees integrates what is called «habeas data».

4.3 Principles applicable to the processing of personal data

Under, General Data Protection Regulation,¹²⁸ subject to the exceptions permitted under Article 23,¹²⁹ all processing of personal data must comply, first, with the principles relating to processing of personal data set out in the Article 5 — what was kwon under Article 6 of the Directive 95/46 like «principles relating to data quality» — and second with one of the conditions established for the lawfulness of processing listed in Article 6.¹³⁰ These principles, applicable to processing of personal data,¹³¹ oblige the Administration to establish control mechanisms over personal data that are in their possession and may be exchanged, in order to guarantee, on its own motion, their veracity, that is, their accuracy and updating. All this, without prejudice to the rights of individuals to access, rectify and cancel their personal data.

Consequently, these control mechanisms must allow the Administration to erase or rectify inaccurate or incomplete data. Therefore, unless the data held by the Administration is obtained directly from the taxpayer or from a third party affected by the exchange of information, the quality of the data would require to verify this information with the information held by the individuals, before the requested State proceed with the exchange of information. In these sorts of cases, the principle of data quality will allow the taxpayer or third party to know the existence of an exchange of information and be able to oppose it, because the information to be exchanged is not updated or is incorrect.

According to the principle of purpose limitation — Article 5.1 b) — personal data shall be «collected for specified, explicit and legitimate purposes and not further processed in a manner that is incompatible with those purposes». A broad interpretation of this precept would imply a breach in the guarantees that the norm itself wishes to establish in favor of the individual. Therefore, the interpretation of the scope of this article must be defined by the sectoral rules that regulate the use of information and the exchange of information held by the tax administration. Particularly, by the so-called «principle of speciality» that regulates the purpose for which the information exchanged can be used.¹³²

Finally, it should be pointed out that the transfer of data to a third country constitutes in itself a processing of personal data.

The regulation of these transfers establishes a regime complementary to the general one which lays down the general conditions for the lawfulness of the processing of personal data and is aimed at ensuring a control by the Member States of transfers of personal data to third countries. Such a transfer can only take place if those third countries guarantee an adequate level of protection. The fact that such adequacy has been declared by the Commission does not preclude private individuals concerned by such transfer from submitting questions to the supervisory authorities and from initiating judicial proceedings in which this adequate level of protection is called into question, however, only the EUCJ can declare the Commission's action invalid.¹³³

4.4 Restrictions to Right to «informational self-determination»

In accordance with Article 23 of the Regulation (EU) No 2016/679, the scope of the obligations and rights provided by Article 5 can be restricted by way of a legislative measure as long as such a restriction respects the essence of the fundamental rights and freedoms and is a necessary and proportionate measure in a democratic society to safeguard, among other interests, «an important economic or financial interest of the Union or of a Member State, including monetary, budgetary and taxation a matters, public health and social security» (Article 23 (1) point e of the Regulation) .¹³⁴

At this point we can make three considerations. The first is that the possibility of limiting such rights and obligations is narrower in Article 23 of the Regulation than in Article 13 of the Directive, because it expressly includes two additional restrictions. The first, respect for the essence of fundamental rights and freedoms and, the second, that the measure is not only necessary, but «necessary and proportionate in a democratic society». These restrictions have been inspired by the EUCJ case law , Judgment Österreichischer Rundfunk and Others, where the EUCJ assumes the jurisprudential doctrine of the ECtHR, not only in relation to the protection of personal data but also to the protection of private life, and concludes that «In any event, that provision [Article 13 Directive 95/46/EC] cannot be interpreted as conferring legitimacy on an interference with the right to respect for private life contrary to Article 8 of the Convention».¹³⁵

The second consideration is that a data treatment that does not respect the requirements of the principle of data quality, that is, a treatment of inaccurate, outdated, unlawful or unfair data, can hardly be accepted. The foregoing, without prejudice to the liability of the Tax Administration for the inappropriate processing and subsequent transmission of such data.¹³⁶

And the third consideration is that the arguments previously made about the effectiveness of the data quality principle become more consistent if we look at the EU regulation of the exchange of tax information. As stated above, Regulation (EU) 2016/679 is applicable to all types of information exchange, and the regulations governing the exchange of information currently refer to the rules governing the protection of personal data. Indeed, in the field of VAT information exchange, the restrictions of Article 23 of Regulation (EU) 2016/679 do not affect Article 5 of that Regulation, in other words, it does not limit the principle of data quality. The same conclusion can be reached by analyzing the exchange of information on excise duties¹³⁷ or the Directive 2011/16/EU.¹³⁸ In addition, as a novelty, Regulation (EU) 2010/904¹³⁹ specifies the scope of Article 23 (1) point (e), as a sign of a greater guarantee for the individual concerned by the exchange of tax information.

On the other hand, data processing that ignores the requirements of proportionality that emanates from article 5 can hardly be accepted. Accordingly, personal data must be «adequate, relevant and limited to what is necessary in relation to the purposes for which they are processed» and must be kept «for no longer than necessary» for such purposes. The requirement of relevance must be put in relation to the necessary nature of the data, that is, with its tax significance. From this perspective, the tax importance, the tax relevance of the information, the «foresee relevance» of the information requested, must be respected in the exchange of information by both the requested State and the requesting State, in this case, as a manifestation of the so-called «principle of subsidiarity».¹⁴⁰

In relation to the lawfulness of processing of personal data, it is convenient to highlight the requirement of the consent of the data subject. This requirement is directly related to the right to information. However, this consent is not necessary, and consequently, the right to information would remain in the background, when the processing of personal data is necessary «for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller».¹⁴¹ Therefore, it seems clear that tax authorities are authorized to process personal data without the prior consent of the data subject.

4.5 The rights of defence of the data subject

The rights of the data subject may be limited by virtue of Article 23 of the Regulation (EU) 2016/679.

The Right to be informed is ruled in Articles 13 and 14, this right constitutes an essential element for the data subject to exercise the rest of his rights and to validly provide consent. However, the right of access, rectification, cancellation and opposition may be exercised independently of the right to be informed.

The regulation and content of the right to be informed is different depending on whether the personal data is collected from the data subject¹⁴² or not.¹⁴³ In the latter case, the controller shall provide the information «if a disclosure to another recipient is envisaged, at the latest when the personal data are first disclosed». The right to be informed can be restricted under Article 23 of the Regulation, however, this right cannot be eliminated or emptied of content. In my opinion, the maximum time limit, to inform the interested party that the principle of proportionality would require is the moment of communication of the information to another State. In this way, the ongoing investigation activities will not be hindered, nor will the exchange of information to another Member State. Once informed, the interested party could exercise their rights of access, rectification or cancellation of the data exchanged. In this case, the Administration transmitting the data has the obligation to inform the receiving administration about changes in the effectiveness and content of the data supplied, by virtue of the principle of data quality.

The EUCJ¹⁴⁴has ruled that the limitations laid down in Article 13 when they apply to Articles 10 and 11 of Directive 95/46/EC do not allow the establishment of national rules empowering the public administrative body of one Member State to transfer personal data to another public administrative body and the subsequent processing of such data, without the data subjects having been informed of such transfer or processing.

The right to be informed is directly related to the possibility of notifying the interested party of the request for information made by a Member State. This possibility was initially regulated in the field of VAT in Article 8 of Regulation (EEC) 218/92 and of the excises in Article 15 ter of Directive 92/12/EEC, but this possibility was not reproduced in subsequent regulations. In any case, EU law does not preclude Member States from establishing such an obligation to notify, as in the case of the Netherlands or Portugal.

The Right of access by the data subject.¹⁴⁵ The data subject shall the right to obtain from the controller confirmation as to whether or not personal data concerning him or her are being processed, and, where that is the case, access to the personal data and the following information necessary for exercise his o hers rights: the purposes of the processing, categories of personal data concerned; the recipients to whom the personal data have been o will be disclosed, in particular recipients in third countries or international organizations, in this case, the data subject has the right to be informed of the appropriate safeguards pursuant to Article 46; the period for which the personal data will be stored, where the personal data are not collected from the data subject, any available information as to their source.

The Right to rectification.¹⁴⁶ The data subject shall have the right to obtain form the controller without undue delay the rectification of inaccurate personal data or the right to have incomplete personal data completed.

The Right to erasure¹⁴⁷ (“right to be forgotten”). The data subject shall have the right to obtain from the controller the erasure of personal data without undue delay.

The Right to restriction of processing.¹⁴⁸ The data subject shall have the right to obtain from the controller restriction of processing, where the accuracy of personal data is contested by the data subject; the processing is unlawful and the data subject opposes the erasure of personal data and requests the restriction of their use instead; the controller no longer needs the personal data for the purposes of the processing but they are required by the data subject for the establishment, exercise or defence of the data subject; and finally, the data subject has objected to processing pursuant to Article 21 pending the verification whether the legitimate grounds of the controller override those of the data subject.

The controller shall communicate any rectification, erasure of personal data or restriction of processing carried out in accordance with Articles 16,17 and 18 to each recipient to whom the personal data have been disclosed, unless this proves impossible or involves disproportionate effort. The Controller shall inform the data subject about those recipients if data subject requests it.¹⁴⁹ This obligation arises as a consequence of the exercise of rights by the data subject, and should not be confused with the obligation of the Administration to communicate such changes under the principle of data quality, which would be an ex officio communication by administrations.

The Right to object.¹⁵⁰ The data subject shall have the right to object, on grounds relating to his or her particular situation, at any time to processing of personal data concerning him or her which is based on point (e) or (f) of Article 6(1), including profiling based on those provisions. The controller shall no longer process the personal data unless the controller demonstrates compelling legitimate grounds for the processing which override the interests, rights and freedoms of the data subject or for the establishment, exercise or defence of legal claims.

The data subject shall have the Right not to be to a decision based solely on automated processing which produces legal effects concerning him or her or similarly significantly affects him or her. This right shall not apply if the decision is authorized by UE or Member State law to which the controller is subject an which also lays down suitable measures to safeguard the data subject’s rights and freedoms a legitimate interest.¹⁵¹

Finally, the data subject who has suffered material or non-material damage as result of an infringement of this Regulation shall have the Right to receive compensation from the controller for the damage suffered.¹⁵²