ZOCG: Prevent the continuation of organized abuse of taxpayers' procedural rights to the detriment of municipal budgets

The Union of Municipalities of Montenegro (ZOCG) announced today that it has submitted an initiative to amend the Law on Real Estate Tax in order to prevent the continuation of organized abuse of taxpayers' procedural rights to the detriment of municipal budgets.

"The Minister of Finance Novica Vuković, to whom this initiative was addressed, showed full understanding of this problem and immediately reacted by starting the procedure for drafting a new legal solution. Due to the extreme importance of this issue for all local governments, a meeting has been scheduled for next week at which, officials of the Ministry, also expects the participation of representatives of the Secretariat for Legislation, as well as of the Administrative and Constitutional Court. found the best way to overcome this systemic problem", the announcement states.

The ZOCG added that they have registered that in recent years, in a certain number of Montenegrin municipalities, there has been an escalation in the occurrence of typical appeals against first-instance decisions determining real estate tax, where the appellants are represented by certain organized groups of law offices and lawyers who charge large amounts on that basis from local budgets for administrative procedure costs.

"The data obtained by the Union of Municipalities of Montenegro from only nine municipalities show that over two million euros have been paid on this basis for the last few years, the largest part of which is from the capital city's budget, and that the payment of the same amount is forthcoming in the procedures that are in ongoing," the ZOCG press release reads.

In the initiative signed by the president of the Board of Directors of ZOCG, Dušan Raičević, it is stated that the most common reason why lawyers succeed in appeal proceedings, i.e. lawsuits in administrative disputes, is contained in the fact that the first-instance authority makes a tax decision based on data from public registers such as the cadastre real estate and the central population register, which are often incorrect or incomplete.

"That is why, upon appeal, the originally determined amount of tax is most often reduced, which is the basis for charging the costs of the administrative procedure in full. Namely, according to the jurisprudence of the Administrative Court of Montenegro and the Supreme Court of Montenegro, it is considered that in this case the procedure has ended favorable for the party and that the difference in the amount of tax from the first-instance decision and that determined in the appeal procedure gives the right to charge the full amount of the costs of the procedure, even when that difference is negligible," the initiative reads.

The ZOCG said that in order to prevent the possibility of procedures being initiated due to an incorrectly determined amount of real estate tax and the collection of costs based on that, they propose to stipulate that the taxpayer bears the costs of the procedure if it is due to failure to submit a tax return or failure to fulfill other obligations which are prescribed, contributed to the wrongly or incompletely established factual situation in the contested tax decision.

"It is also proposed to prescribe precise obligations regarding notifying the tax authority in the supplement to the tax return of all changes that affect caution, within 30 days from the day when the changes occurred, and that of changes to the building, including the area, number of floors, the purpose and quality of real estate, the number of members of the taxpayer's family, changing the address of residence or place of residence to which tax acts are submitted, or on the appointment of a proxy for receiving letters or a tax representative in cases prescribed by law," the announcement reads.

In the initiative, it is written that "bearing in mind that the real estate cadastre often lacks data on the year of construction of the building, the unique identification number of the owner of the real estate that is taxed as a natural person, and the heirs in the event of the owner's death, we suggest that taxpayers undertake a special obligation to submit this data to the municipal tax office to the authority in a special tax return, within six months from the date of entry into force of this law, and that failure to do so is linked to the payment of the costs of the taxation procedure".

The ZOCG said that it is a proposal and that it is in the public interest to extend the scope of application of that law to all initiated proceedings in order to reduce the risk of paying the costs of proceedings in a large number of current proceedings in which taxpayers, through lawyers, have submitted proposals to amend the final or a legally binding tax ruling.

"We hope that the Ministry will recognize the need for an immediate solution to this problem and that with proposed or similar interventions in the Real Estate Tax Act, they will prevent further organized and unethical use of procedural rights to the detriment of municipalities, caused by incorrect data in public registers and valid legal solutions that are not in sufficiently protected public interest. This will essentially contribute to directing budget funds for purposes that are in the interest of citizens, and not in the interest of individual law offices and lawyers," the ZOCG initiative says.