Explicit in Article 100 paragraph 1 GG, §§ 80 ff. in conjunction with §§ 77 ff. BVerfG regulates the competence of the courts to decide on the compatibility of the simple law with the constitution and the provincial laws with federal law. However, no provision has been made as to whether public authorities, and in particular financial authorities, have such auditing competence. In this article, we explain how the tax authority acts when it considers a tax law to be unconstitutional and what it has to consider.

1. Audit competence of financial authorities

1.1. Definition of audit competence

The examination and rejection competence of laws concerns the question of who is responsible for determining a conflict of laws and deciding on the legal consequences of the conflict of laws. A standard collision can occur in different cases. A federal norm can collide with the Constitution according to the norm hierarchy. A state law standard can also conflict with any federal law. It is not a matter of the right of the authorities, but rather of the distribution of competences, that the constitutional test of standards is concerned.

Legally, there is no provision that determines how the administration should behave against unconstitutional federal law or state law. Only a judgment of the Bundesfinanzhof (BFH) of 12.12.1985 stimulated the discussion. The question fundamentally concerns the relationship between the two powers legislative and executive.

1.2. Opportunities for action of the financial authorities

There are various ways in which the financial authority could behave if it assumes such a collision of standards. On the one hand, it could reject the norm considered unconstitutional, i.e. declare it invalid. On the other hand, it could have the possibility not to apply the standard. Prior to this, however, the question arises as to whether the financial authority is allowed to check the constitutional conformity of a standard at all, i.e. whether it has the auditing competence or whether it simply has to assume constitutional conformity. On the other hand, the authority could even make the duty to review a standard for constitutional doubts. The financial officer could also decide for himself or call his superior.

In any case, however, it is clear that the financial authorities may not reject a norm, i.e. declare it invalid. The reason for this is the so-called rejection monopoly of the Federal Constitutional Court (BVerfG).

1.3. The dilemma for the financial officer

The financial officer, if he considers a norm unconstitutional, faces a dilemma. Article 100 (1) GG shows that unconstitutional laws are not null and void, but can only be destroyed by the Federal Constitutional Court. The law therefore continues to apply, so that the tax officer is bound by it in accordance with Article 20 paragraph 2, Article 1 paragraph 3 GG. Since the law continues to apply, the official may not refuse obedience to the law.

On the other hand, it is also bound by the constitution. This binding prohibits him in himself the application of an unconstitutional law. The tax officer should therefore neither apply nor reject an unconstitutional law. All these aspects must be taken into account when assessing the audit competence of the financial authority.

2nd principle: monopoly of rejection of the Federal Constitutional Court

The Federal Constitutional Court is responsible for the so-called monopoly of rejection according to Art 100 paragraph 1 GG. The result is that only the Federal Constitutional Court can declare a norm invalid. The Federal Constitutional Court has specified its scope in various decisions. It is therefore limited to formal law. These must be enacted in accordance with the constitution serving as a test standard (so-called post-constitutional laws). Land laws, on the other hand, must be enacted temporally in accordance with federal law serving as a standard.

3rd decision of the BVerfG

3.1. Starting point: § 251 AO

In 1985, the BFH submitted a case to the BVerfG concerning the auditing competence of the financial authorities. The starting point was the regulation of § 251 AO. Accordingly, the Authority may suspend the execution of an administrative act contested by an appeal. The decision to suspend execution is a discretionary decision. According to the principles developed by tax courts and administrative courts, however, the authority must suspend if there are serious doubts about the legality of the appealed decision.

The BFH assumed that this condition did not exist if the objections were directed against the constitutionality of the underlying law. The presumption of constitutionality of the underlying law in the parliamentary-democratic constitutional state results in the obligation of the authority to regard a law as constitutional until a possible negative decision by the BVerfG. Therefore, the tax authority is not obliged to suspend execution. Whether the tax authority, on the other hand, may suspend the execution, left the BFH, since the tax authority did not want to suspend anyway.

However, the BVerfG decided to the contrary. If serious doubts about the correctness of the interpretation and application of the law justify a suspension, then this must apply even more when serious constitutional concerns are raised about the validity of the law itself. According to Article 20 paragraph 2, Article 1 paragraph 3 GG, executive power is also bound by law and order, in particular by the Constitution. The principle of the separation of powers does not oblige the execution of a law which must probably be declared null and void. The concern about taking on inadequately justified suspensions is unfounded because of the authority of higher authorities to instruct. Finally, the Federal Government or the Land Government could bring about a clarification by way of Article 93 (1) number 2 GG.

3.2 Concrete impact of the judgment on audit competence

But even with this, the BVerfG does not clarify the auditing competence of the financial authorities. Strictly speaking, § 251 AO concerns only the question of whether an administrative act under appeal is to be suspended. However, the problem of whether the administrative act can be adopted at all, i.e. whether a law can be applied, is not resolved. This differentiation is of considerable importance because of the different legal consequences. If the tax authority waives the adoption of an administrative act because of constitutional doubts, limitation or at least forfeiture may occur. On the other hand, forfeiture or limitation shall not occur if the administration adopts the administrative act and suspends its enforcement only during an appeal pending.

The judgment of the BVerfG has meaning beyond the provision of § 251 AO. The Court of First Instance finds that the administration is not obliged to enforce a law that is likely to have to be declared null and void. However, it becomes clear that the court apparently only wants to allow particularly weighty concerns as grounds for suspension. However, the law does not contain any statement as to whether and under what conditions an official is obliged to examine constitutionality. Furthermore, the judgment is tailored to the specificity of the execution of an administrative act under appeal. It cannot therefore be inferred from him what concrete consequences the civil servant may or must draw if he has doubts about the constitutionality of a law.

4. The design of audit competence

The tax officer can only live up to his or her commitment to the possibly unconstitutional law and to the constitution itself by suspending the application of the law and setting in motion a decision on the constitutionality of the law.

For this purpose, the tax officer must consider whether the applicable law gives rise to doubts about its constitutionality. If he has doubts, he must initiate the constitutional examination. This takes place within the framework of a constitutional standards control. The constitutional control of norms is brought about by the tax officer by asking the superior authority for instructions for his behavior, explaining his legal opinion. For its part, the superior authority must check whether it has doubts about the constitutionality of the law. If it shares the opinion of the financial official who initially dealt with the question, it must refer the question to its superior authority. This may continue up to the Minister. The latter then submits the question to the Cabinet, if necessary. In the event of doubts about constitutionality, the latter is obliged to initiate a standard examination procedure before the Federal Constitutional Court or the Land Constitutional Court in accordance with Article 93 (1) no. 2 GG.

If the tax officer, the superior, the minister or the government fails to submit the bill culpably, he is exposed to a liability under § 839 BGB, Article 34 GG. This is at least the case if the official applies a rule against whose constitutionality doubts have been raised and if, contrary to better knowledge, he omits to raise these doubts to the superior.

5th Special features in the financial process

In the financial process, the assessment of the authority’s audit competence may be easier. Here the implementation of the law at a later date is reasonably safe. On the other hand, a law can also ban an assembly, for example. If the clerk has doubts about the constitutionality of the law, he can suspend the application of the Prohibition Act so that the meeting can take place. The decision of the superior on constitutional conformity is regularly not brought about in time. If the superior shares the constitutional doubts, the cumbersome path via Article 93 paragraph 1 no. 2 GG will of course not be completed in time. A decision confirming the constitutionality of the law is then regularly too late. The meeting has now taken place. This usually means that any decision confirming the constitutionality of the law comes too late when the execution of a prohibitive law is suspended.