Actions Impermissible in a Democratic State Under Rule of Law
A Warsaw entrepreneur won his dispute with the tax authorities twice—clear victories in court ordering officials to refund his value-added tax. The authorities, duly obligated to comply, have not returned his money. Courts have fined them for this refusal, characterizing the officials’ conduct as a flagrant violation of law. Still, they decline to return the more than four million złoty they owe him.
The entrepreneur had filed a complaint against the inaction of the chief of one of Warsaw’s tax offices regarding his request for a V.A.T. refund—taxes overpaid in October and November of 2017. On November 7, 2019, the Provincial Administrative Court in Warsaw issued two rulings (Case Nos. III SAB/Wa 48/19 and III SAB/Wa 49/19) that twice found the tax chief had failed to refund the surplus of input V.A.T. over output V.A.T., and twice determined that this inaction constituted a flagrant violation of law. In each ruling, the court imposed a fine of a thousand złoty on the tax office and ordered it to reimburse the entrepreneur’s legal costs. Most significantly, the court ordered the office to make the V.A.T. refunds—totalling 4.11 million złoty—within fourteen days of receiving the final judgment, or to issue a decision formally denying the refunds within that same period.
The backstory involved its own cascade of delays. In November, 2018, the Provincial Administrative Court in Warsaw had issued two earlier rulings (Case Nos. III SA/Wa 1158/18 and III SA/Wa 1895/18) holding that the tax office could no longer extend the deadline for the entrepreneur’s V.A.T. refunds. The court found that orders extending the refund deadline—one dated November 27, 2017 (for the October refund), and another dated December 28, 2017 (for the November refund)—had been delivered to the entrepreneur after those deadlines had already passed. The rulings established that once the refund deadline expired, the authorities had no legal basis to withhold payment any longer. Yet they had done precisely that, repeatedly—extending the deadline for each refund seven times.
Despite these favorable rulings, the entrepreneur never saw his money. After the November 16, 2018, judgments, the tax office continued withholding the refunds three more times, through orders issued on December 13, 2018, March 22, 2019, and June 13, 2019. Robert Nogacki, an attorney with Kancelaria Prawna Skarbiec representing the company, filed a complaint on its behalf against the authority’s inaction, demanding that officials issue a final administrative decision on the tax refund within fourteen days. He also requested that the court review the protracted nature of the proceedings, order the authority to sanction the employee responsible for the delay, and fine the tax office itself. The company’s counsel argued that the tax authority had failed to comply with the court’s binding judgment, once again extending the deadline for the refund despite the court’s explicit ruling that such extensions were legally impermissible.
The tax office disagreed with the complaint, claiming it had gathered sufficient evidence confirming the entrepreneur’s participation in tax fraud, and that all its actions aimed to protect the State Treasury from loss and to conduct “a thorough and expeditious tax audit.”
In its November 7, 2019, rulings (Case Nos. III SAB/Wa 48/19 and III SAB/Wa 49/19), the Provincial Administrative Court in Warsaw found that the tax authority’s inaction constituted a flagrant violation of law. The court determined that the office had been in a state of inaction since November 29, 2017—the day after the deadline for the improperly extended refund had passed. However, because the November 16, 2018, judgment—which established that the authority lacked the power to extend the refund deadline and which officials were obligated to respect—didn’t reach the tax office until February 15, 2019, the court dated the flagrant violation from February 16, 2019, onward. The court ordered the authority to refund more than four million złoty to the entrepreneur or to issue a decision formally denying the refund, and imposed two fines of a thousand złoty each.
“By failing to issue any decision regarding the tax refund for the above period,” the court wrote, “the Tax Office Chief effectively negated the legal state created by the final judgment, which means he challenged the content of that judgment. The court adjudicating this case deemed such a situation impermissible in a democratic state under the rule of law.” (Case No. III SAB/Wa 48/19.)
There were other dimensions to the case. On October 31, 2019, the Director of the Tax Administration Chamber in Warsaw—responding to an appeal filed by the entrepreneur—discontinued proceedings regarding the refund extension, finally respecting the court’s November 16, 2018, rulings. The tax office chief ignored this decision from his own superior and still refused to make the refund.
On November 29, 2019, in response to an October 18th appeal filed by Nogacki challenging the tax office’s refusal to acknowledge the company’s objections to ongoing enforcement proceedings, the Director of the Tax Administration Chamber ruled that he would not address the matter within the timeframe prescribed by tax law. Citing the need to establish all circumstances of the case, he extended the time for authorities to gather evidence and evaluate it, pushing the deadline for resolving the matter to January 14, 2020. Moreover, the director noted, this was merely the “anticipated” resolution date.
This wasn’t about extending time to gather evidence—it was about giving the authority more time to search for evidence against the entrepreneur, to avoid returning the more than four million złoty owed to him under court judgments. And certainly to avoid making that refund before year’s end, which would hurt the tax authority’s collection statistics and its reported successes in tightening the V.A.T. system. The question, though, is whether these actions can still be characterized merely as a violation of law, or whether they constitute official lawlessness—what the Warsaw court called impermissible in a democratic state under the rule of law.
“The Tax Office Chief violated the law through the unlawful failure to make the refunds of the disputed amounts of surplus input tax over output tax or to issue a decision denying the refund,” the court concluded, “remaining in a state of inaction that constituted a flagrant violation of law.” (Provincial Administrative Court in Warsaw, November 7, 2019, Case No. III SAB/Wa 48/19.)
The arithmetic of obstruction was stark: seven extensions before the first court ruling, three more afterward, a favorable decision from the entrepreneur’s own appellate authority ignored by the local office, and, through it all, a refusal that persisted past multiple court orders and fines. One might ask what, exactly, a court judgment means when the losing party simply declines to comply—and what “rule of law” signifies when officials tasked with enforcing it choose instead to flout it.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
