Good Faith in the Process of Making and Interpreting Legal Regulations on Value Added Tax
Good Faith in the Process of Making and Interpreting Legal Regulations on Value Added Tax

Summary/Abstract: The issue whether the content, interpretation, or construction, and, subsequently, application of laws and regulations are formed in good faith is probably of a broader dimension, exceeding the confines of tax laws – the value added tax (VAT) law included. This perspective of tax-law analysis is still part of an ‘incorrect’ current in the literature, with its predominant optimistic, ‘rectified’ vision of the Community version of VAT. Few have posed the question whether the mass-scale tax evasion and the hitherto unknown scale of tax fraud were caused, or at least supported, by the VAT regulations, their construction and application having been moulded in ill faith. By ‘ill faith’ I understand an attitude and deliberate action in respect of a given tax that proves to be entirely contrary to public interest and, above all, is not intended to enable legal budget revenue, whilst, in parallel, protecting the interest of honest citizens. Instead, such an attitude and actions would have sought to gain illegal, or apparently legalised, benefits at the expense of the State budget and honest taxpayers. The problem concerns, in particular, the Community version of VAT that has been in force in Poland since 1 May 2004 (Act of 11 March 2004). The regulations on this particular tax were shaped in a way that has effectively enabled - or only apparently counteracted at best - the pathological phenomena of mass evasion of VAT or VAT fraud. It is undisputable that the regulations in question were worded with the knowledge that it would not sufficiently protect public interest and open the potential for abuse (‘legislative investments’). This is one of the two spaces where ill-faith action is identifiable, the second being the false propaganda on the apparent advantages of VAT, which was depicted as taxpayer-friendly and safe. The supreme purpose was to attract thousands of VAT taxpayers into unconscious participation in tax evasion and fraud - the occurrences that would not have been possible without their participation. Regrettably, these aspects of ill-faith action have attained their purpose, which has, in turn, translated into fundamental and lasting shrinkage of budget revenue and undermined trust toward VAT among citizens.

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