A tax law clinic that wanted to take up work at the University of Hanover has lost its case before the Fiscal Court of Lower Saxony. Since the court already considered the complaint inadmissible, the legal situation remains unclear.

Background

So-called law clinics are still quite new in Germany, but are becoming more and more established. Law clinics are established at universities and offer counselling by students under the supervision of experts, e.g. lawyers and professors. The counselling is free of charge and is primarily intended to educate prospective lawyers.

Surprising for many people is the fact that free legal advice – even from fully qualified lawyers – was not permitted until the German Federal Constitutional Court’s decision in 2004 and is explicitly permitted only since 2006 according to Section 6 of the German Legal Services Act (“GLSA”). An obligatory requirement  is, however, in any case that the legal advice is given by or under the supervision of a fully qualified lawyer.

This "Lex Kramer" can be traced back to the efforts of the lawyer Helmut Kramer, who turned himself in and went to the Federal Constitutional Court to achieve this change in the law. The previously valid regulation was intended to prevent circumvention of the ban on legal activity by unauthorised persons. However, if one considers the fact that the law was enacted in 1935, it quickly becomes clear that the intention was probably not only to ensure the quality of legal advice.

The tax law clinic Hanover

While previous Law Clinics have mainly dealt with general civil law or migration and social law, the Association for the Promotion of Tax Law at the University of Hanover (“Verein zur Förderung der Steuerrechtswissenschaft”), recognised the need for tax law advice and developed a corresponding concept. The Association already has more than 200 members, about half of them students as well as lawyers and tax consultants, financial judges, institutions and law firms.

The Association though was not very lucky: The competent tax authority considered the activity inadmissible. That is because tax law follows different rules: Here, the GLSA does not apply as for all other fields of law, but the Tax Consultancy Act (“TCA”), which does not have a provision corresponding to Section 6 GLSA. "Business assistance in tax matters" is therefore only permitted by authorised persons, i.e. tax consultants, lawyers or special wage tax assistance associations.

The Association was aware of this fact and that there might be problems against this background. That is why – before taking up the activity – they wanted to secure themselves legally, as unauthorised activity constitutes an administrative offence and can be punished with a fine. In the worst case, the Association could have lost its status as non-profit organisation. The Association did not count on a positive decision of the tax office and was prepared for a complaint.

The Association still was optimistic that against the background of the equal requirements in the TCA and the fact that the relevant provision of the TCA essentially corresponds to the previous regulation of the GLSA (which was abolished in 2006), free tax advice under the supervision of experts would also be permitted.

The decision of the fiscal court

...unfortunately leaves this question unanswered. The judges in Hanover have ruled that the action is already inadmissible because there is no need for a "preventive" clarification: Instead of bringing an action for a declaratory judgment that free assistance in tax matters by students under the guidance of lawyers in the Tax Law Clinic is permissible, the Association should – in the opinion of the court –have taken up the activity and then defend itself against the prohibition order of the tax office.

In the long run this decision came not surprisingly for the Association, but does meet with incomprehension. The Association categorically rules out any illegal conduct in order to bring the matter to legal clarification. This seems the most curious thing about this case: plaintiff and defendant even agreed on this point. In the opinion of the defendant tax office, the Association could not be expected to violate the law and commit an administrative offence by starting its activities. The Federal Constitutional Court has actually already decided this in its decision of 7 April 2003 (file number 1 BvR 2129/02): According to the Federal Constitutional Court it is not reasonable to expect a person affected to have to experience the clarification of questions of administrative law “in the dock” by appealing against a sanction.

Where to go from here

The Association has now filed a complaint of non-admission with the German Federal Fiscal Court (Bundesfinanzhof) (file number VIII B 96/19). It remains to hope for a positive decision of the German Federal Fiscal Court or an early reorganization of the TCA.

Anna-Maria Drescher, Attorney
Frankfurt am Main