Secrecy of communication: the limits of the investigative powers of the Belgian tax authorities
The Belgian tax authorities’ right to request information
The Belgian tax authorities have wide powers of investigation to assess the correctness of taxpayers’ income tax returns. These powers include, among others, the right to request information from taxpayers which is relevant either for the assessment of their own tax treatment or for the tax treatment of third parties.
The addressee of a request for information should lend its cooperation to the tax authorities, and thus answer these requests for information, within the boundaries imposed by the law. Failure to cooperate may result in the imposition of administrative fines (in addition to tax adjustments), which is a threat that is often used by the tax authorities in practice.
No exception to the secrecy of communication
In a recent case, the tax authorities requested a telecom operator to provide a copy of certain invoices of a customer. Although the tax authorities had indicated that they were only requesting the details of the invoiced services, they actually wanted to receive the traffic and location data of the taxpayer. The telecom operator refused to communicate this information to the tax authorities, invoking the secrecy of telecommunications (Article 124 of the Electronic Communications Act of 13 June 2005 or “ECA”). Following this refusal, the tax authorities imposed two administrative fines on the telecom operator who appealed this decision.
The case was brought before the Brussels Dutch-speaking Court of First Instance, which had to decide whether the tax authorities’ right to request information and the correlative obligation for the taxpayer to co-operate can qualify as an exception to the secrecy of telecommunications. Indeed, the above Article 124 of the ECA is subject to certain exceptions, including when authorised or imposed by a law (Article 125 of the ECA).
The Court ruled that, in this case, the request was not covered by this exception. This is because the tax authorities’ right to request information is drafted in general terms and does not contain an explicit reference to the ECA. According to the Court, the above tax provisions are not sufficiently clear and precise as to their scope or application. Lastly, the Court considered that the transmission of traffic and location data constitutes a serious interference with the right to private life and that this interference was not proportional in that particular case.
The Court also clarified that Article 122 of the ECA, which provides for an exception to the obligation for telecom operators to delete or anonymise traffic data for invoices does not qualify as an exception to the secrecy of telecommunications.
In other words, the Court confirms that the telecom operator would have breached its duty of secrecy of telecommunications if it had provided customer invoices revealing traffic and location data to tax authorities. Such breach is subject to criminal sanctions.
What this means for you
This case law is welcomed. It is in line with the judgment of the Court of Justice of the European Union (“CJEU”) of 24 February 2022, C-175/20, which concluded that the tax authorities are not exempt from the application of the General Data Protection Regulation (“GDPR”). Although the legal basis of the two judgments is different (i.e. the ECA for the Brussels Court of First Instance and the GDPR for the CJEU), the main conclusion to be drawn from these decisions is that data protection and privacy undoubtedly mark a limit that the tax authorities cannot cross when exercising their investigative powers.
When the tax authorities ask you to provide information about third parties (e.g. customers, suppliers, competitors), it is therefore essential to check whether the transmission of such information complies with the GDPR or any other related rules, such as the ECA.