In the pre-covid-19 era, data dumps were performed by the tax authorities during dawn raids at the premises of audited companies. In cases of excessive data gathering, solutions need to be sought to protect private and confidential data (such as documents covered by the legal privilege of lawyers as well as the professional secrecy of other professions such as accountants and tax advisors). While the tax provisions are insufficient in this respect, the European Charter of Fundamental Rights, the European Convention on Human Rights and the Belgian Constitution clearly foresee the protection of private and confidential information.
The covid-19 pandemic accelerated digital transformation in the relations with the tax authorities. Recently, we have observed that the tax authorities not only virtually request data dumps but also use artificial intelligence to perform sample testing on accounting data. This evolution brings new challenges in terms of security and authenticity of data and evidential value of the results of these testings.
Some taxpayers deployed judicial recourse to safeguard private and confidential data which was not always successful. For an analysis of the divided case law (recent decisions of the Court of First Instance of Antwerp of 7 January 2021, Court of First Instance of Brussels of 15 January 2021 and Court of First Instance of Ghent, 10 juillet 2019), see the article of Véronique de Brabanter in Fiscal Koerier
Since prevention is better than cure, a multidisciplinary team of PwC Legal lawyers together with PwC crisis management and forensic experts developed a Crisis App to provide on-demand assistance in case of a crisis such as cyber attacks, data breaches or a tax dawn raid (find out more on our website. When faced with a crisis, organisations struggle with its complexity, rapid evolution, the lack of information, coordination and decision-making. In times like these, organisations can use a partner as PwC Legal/PwC that knows what to expect, what an authority can and cannot do and that can safeguard taxpayers rights from the start.
The tax audit climate is clearly becoming more challenging for taxpayers and managing data is playing an important part therein. Up-front screening of both internal information and information publicly available and aligning these data with a consistent messaging can help organisations to be better prepared in case of a tax audit and to avoid controversy (for more information, listen to our Tax Bites podcast).
Given the increased tax transparency and international cooperation between tax authorities, tax data management should be covered on an international scale instead of limited to the domestic level. With respect to the recent steps towards increased transparency see following links:
Articles by Véronique De Brabanter and Gilles Van Hulle on DAC 7:
“DAC 7: nieuwe stap in administratieve samenwerking”, Int. Fisc. Act. 2021/01
“Bijkomende fiscale transparantie van de digitale economie”, Int. Fisc. Act. 2021/04
