There is nothing certain in this world but death – and taxes. However, it should also be certain that taxes for the same period are collected by only one tax authority. This principle is stipulated in the Federal Constitution, which prohibits double taxations. However, previous practice in inter-cantonal tax law has only partially adhered to this prohibition, allowing inter-cantonal double taxation to occur despite the constitutional rule.
Previous practice
According to the previous practice, taxpayers were considered to have forfeited their right to appeal and demand the elimination of double taxation if they unconditionally acknowledged a tax liability in another canton despite the conflicting tax claim of another canton. This was particularly the case where the taxpayer had unconditionally filed a tax return, unconditionally paid the claimed taxes, and had not appealed the tax assessment. Apart from these circumstances, for tax payers it was also possible to forfeit the right to appeal if the taxpayer’s behavior was considered to be abusive or in bad faith.
New practice
In its decision 9C_710/2022 of August 17, 2023 (to be published), the Swiss Federal Supreme Court took the opportunity to reconsider this practice. It concluded that the previous practice should be abandoned and that the forfeiture of the right to appeal should be limited to cases where taxpayers have engaged in qualified abusive conduct and the canton, which would have to be denied the right of taxation, has a legitimate interest in retaining the tax collected. However, the mere unconditional filing of a tax return, the unconditional payment of the required taxes, or the decision not to object the tax assessment will no longer result in the loss of the right to appeal with the Federal Supreme Court.
Outlook
The change in practice by the Federal Supreme Court is very welcome and, as the reasoning in the above-mentioned decision shows, was long overdue. As a result of this change in practice, which must be taken into account in all pending cases, intercantonal double taxation can in many cases be avoided. This will be the case even if abusive behavior is presumed, as it is likely to be difficult for the affected cantons to demonstrate a legitimate interest in retaining the unlawfully collected tax.
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