At issue in this case was whether Belgian arm’s length provision in article 344 infringed Article 170 of the Belgian constitution, according to which a tax in favor of the State may only be introduced by law.
“Does Article 344(1) of the Income Tax Code 1992, in the version applicable to the assessment years 1996, 1997 and 1998, infringe Article 170 of the Constitution, in particular Article 1 of that article, which provides that a tax for the benefit of the State may be introduced only by a law, in that Article 344(1) gives the executive authority the task of determining the taxable circumstances or at least makes it possible to determine taxable circumstances either by means of a standard to be laid down by the State itself or by means of a blank form to be filled in?»
The Decision of the Court
In accordance with the principle of legality in tax matters, as set out in Article 170(1) of the Constitution, a person may be subject to a tax only if it has been decided by a democratically elected consultative assembly which alone has the power to introduce that tax.
The legislature itself has laid down the strict conditions, set out in B.3.2 to B.3.5, under which the measure referred to in Article 344(1) of the 1992 Income Tax Code may be applied in order to achieve a legitimate objective, namely to combat tax avoidance, without however affecting the principle that the least taxed option may be chosen (B.3.1). The measure cannot be regarded as a general enabling provision which would allow the administration to determine the taxable object itself by means of a general measure, but as a means of evidence to assess specific situations individually in specific cases, if necessary, under the control of the judge.
In this case, the constitutional principle of legality in tax matters does not require the legislature to specify in greater detail the substantive conditions for the application of the measure, since this is impossible by the very nature of the phenomenon it is intended to combat.
For these reasons the court finds that article 344(1) of the Income Tax Code 1992 does not infringe Article 170 § Section 1 of the Constitution.