County Court in a Wedge, and the Zadar Tax Administration in a Board

Our reader Marinka Daničić has a very interesting problem. On one side, Uskok is seizing her property, and on the other side, the Tax Administration is demanding its due. What is this about?

The reader owns a property that Uskok claims was acquired through organized crime, which is why this property has been blocked, meaning Marinka Daničić cannot enjoy it or use it for economic activities. Since the purchase of the property is under investigation, the County Court in Zagreb on May 18 of last year ordered a temporary measure of securing the confiscation of property benefits (among others) for this property. We do not wish to write about that as it is a matter of investigation and the judiciary, but we want to write about something that defies all logic. Namely, Marinka Daničić received a decision on enforcement on June 3 of this year ‘by seizing and transferring monetary funds’.

Both legally and illegally What happened? The Tax Administration in Zadar concluded that a five percent tax, which is usually paid upon purchase, i.e., registration, has not been paid on this property, and now that tax is due for payment. Although Marinka Daničić appealed this decision, providing evidence that the County Court had excluded the property from possession a year prior, she did not find understanding at the Tax Administration. Our reader rightly wonders, without prejudicing the outcome of the investigation and any potential court ruling, ‘can the tax authority then collect tax on a property that Uskok claims was acquired through crime and is therefore blocked?’ In other words, is this not a case where a temporary measure of prohibition of alienation and encumbrance is imposed, while the state, despite this, says: ‘The property was acquired illegally, but pay tax legally and then I will confiscate it.’
However, according to the Law on the Procedure for the Confiscation of Property Benefits from illegally acquired property, as is the case with this property, tax on real estate transactions cannot be collected because it would be, as Daničić claims, and it is indeed so, a legal dualism, which means that it is unacceptable. Namely, by definition, legal dualism is a situation where, for example, the legal system of international law and the legal system of national law exist as two separate legal orders. However, this is a dispute between two parties in one country with the same legal order, so considering that the Tax Administration believes it is acting in accordance with the law, and on the other hand, there is the Law on the Procedure for the Confiscation of Property Benefits, it means that a kind of legal dualism is indeed at play.

Principles at Will A purchase agreement has been signed, which is not disputed, but there is suspicion that it is illegal. Perhaps this is the straw that the Tax Administration is grasping at, namely that ‘there is suspicion’. In other words, they are most likely adhering to the principles of the presumption of innocence, i.e., that no one is guilty until proven guilty. However, it is hard to believe that the Tax Administration adheres to principles for the sake of principles; rather, they seem to adhere to the principle of ‘take money from whoever you can’, so the principle of presumption comes in handy: they protect one of the fundamental human rights and thus also receive money.
Objectively, this is indeed injustice, because what if it is proven that the property was illegally acquired? In that case, no tax on real estate transactions would need to be paid, because if something is illegal, then there is no contract either. This means that our reader will have to request that the state return the money she paid, which again means that she could be waiting a long time for the Tax Administration to issue a decision.