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A tax refund must not be distrained without a notification to the debtor

In the view of Deputy-Ombudsman Maija Sakslin, the National Administrative Office for Enforcement acted incorrectly in 2011, when debtors were not given advance notification that tax refunds would be distrained nor informed that distraint proceedings had been initiated. The debtors received notification only after the fact.

A person who complained about the matter criticised the way in which the Social Insurance Institution (Kela) and the distraint authorities recouped a study grant from a tax refund. Since the complainant had not been given notification of the matter having been initiated or a demand for payment, he had no opportunity to prevent enforcement of a distraint order against him being placed on enforcement record or to avoid unnecessary costs.

The Ombudsman had received several complaints about the same matter.

In the opinion of the Deputy-Ombudsman, the debtor should have been sent a notification that distraint proceedings had been initiated and a demand for payment as the Enforcement Code requires. Responsibility for the procedure resided with the National Administrative Office for Enforcement.

Two decisions in the background to the error

The improper procedure was based on two earlier decisions.

In 2006 it had been decided that a notification of initiation of distraint proceedings and a demand for payment would no longer be sent when a tax refund was being distrained. The reason given for the decision was that notifications caused large numbers of enquiries. However, an advance notice, on the basis of which the debtor can voluntarily pay the outstanding sum, was still sent when distraint was to be carried out.

In 2011 the practice of sending advance notice to debtors was abandoned for reasons of cost. Under the relevant legislation, notification need not be given if notification of initiation of proceedings has been issued.

It was not realised in this conjunction that, as a result of the earlier decision, notification of initiation of proceedings was no longer being made. Now debtors were only being notified after the fact.

A debtor's protection under the law must not be jeopardised

Deputy-Ombudsman Sakslin is of the opinion that the procedure has endangered the debtor's protection under the law, because the fundamental principles of good administration include the right of the involved parties to be heard. The public authorities have a duty to promote this central guarantee of protection under the law and it must not be interpreted narrowly.

In her view, the large numbers in which tax refunds are made and the busy timetable can not be an impediment to implementation of fundamental rights.

It must be possible to arrange distraint in such a way that advance notifications are sufficiently clear and the debtor has a real possibility to receive information about the distraint procedure.

This year, the matter is in order. According to the report provided by it, the National Administrative Office for Enforcement has revised its notification of initiation of distraint and demand for payment and regularly sends them to debtors.

Distraint procedures in late October - early November

Distraint of tax refunds is carried out in autumn at the turn of October and November.

Distraint offices send data on distraint actions to the tax administration, after which the actions can no longer be cancelled or their number changed.

The tax administration transfers the distrained funds directly to the distraint offices in December, at the same time as the tax refunds would otherwise be paid.

About 200,000 distraint actions affecting tax refunds are conducted each year.

Additional info will be provided by Principal Legal Adviser Riitta Länsisyrjä, tel. +358 (0)9 4321.