In conducting a procurement, an unclear situation occasionally appears in removing persons who owe arrears from the procurement procedure. The Public Procurement Act, § 38 section 1(4) requires the contracting authority to remove a tenderer from the procurement procedure who has arrears of state taxes or local taxes of their place of residence or seat or arrears of social insurance contributions or interest charged on an overdue tax amount (hereinafter tax arrears) as of the date of commencement of the procurement procedure /—/. For the purposes of this Act, arrears mean tax arrears or the interest charged on tax arrears that exceed 100 euros.
There have been situations where the tenderer’s tax arrears have presented on the date of commencement (or on the date of publishing the contract notice in the register) during the procurement procedure. It has been accepted in practice in such a situation that the tenderer has changed the tax returns during the procurement procedure. The tenderer has made changes in previous tax returns after the occurrence of tax arrears, which has resulted in the “abolished” tax arrears ex tunc. In this case, it was considered that the tax arrears have never existed and the tenderer could participate in the procurement procedure.
In May 2014, Tallinn District Court entered an administrative legislation No 3-14-50039 into force, which created a new precedent by removing a tenderer from the procurement procedure in a situation where on the day of the decision of removing from the procurement procedure it appeared in the Estonian Tax and Customs Board database that the tenderer has tax arrears on the date of commencement of the procurement procedure, which later has been “abolished” ex tunc by changing the tax returns.
The District Court found that if the tenderer has tax arrears according to the Estonian Tax and Customs Board database on the day of the decision of removing from the procurement procedure, the decision to remove such a tenderer from the procurement procedure is lawful. Therefore, if the tenderer should change the tax returns later during the procurement procedure and the tax arrears “abolishes” ex tunc as a result, it does not give a reason to declare the decision of removing the tenderer from the procurement procedure as invalid. Therefore, the determinative is the factual situation on a day when the decision of removing the tenderer from the procurement procedure is made—if the tenderer has tax arrears, according to the database, the contracting authority’s decision to remove the tenderer from the procurement procedure is lawful. Therefore, it advisable for the contracting authority to check the tenderers’ tax arrears shortly before the decision-making.
The circumstances of the occurrence of tax arrears—whether it is an intentional tax evasion or so-called accidental/erring tax arrears— does not matter in removing the tenderer from the procurement procedure. The Taxation Act and the Value Added Tax Act provide the obligation to submit the tax return of the taxable person and the presumption of correctness of these data. Hence, even if the tenderer has erringly declared inaccurate data and not breached any tax arrears in actuality, it does not give any grounds not to remove the tenderer from the procurement procedure. The tenderer is responsible for the legality of the presented data. The contracting authority has no obligation or right to take over the functions of a tax authority and investigate whether the tax arrears in the tax arrears registry are correct or not. The District Court provided that the research principle does not apply here due to the formalization and the speed of a procurement procedure, or at least not to the extent provided for the general administrative proceeding.
By Piia Kulm