The Spanish Supreme Court judgment of June 7 2003 has confirmed the right of the Spanish tax authorities to require firms of auditors to disclose documents that may be relevant to determining the tax obligations of their clients. The decision seems to put an end to the debate on whether the obligation to cooperate with the tax authorities prevails over an auditor's duty of confidentiality, and confirms the general trend in the Spanish legal system towards reinforcing the transparency and good management of companies.
The general obligation of consultants and other professionals to provide the tax authorities with information relevant for tax purposes is imposed by article 111 of the General Taxation Law (Ley General Tributaria). The article does provide, however, for an exception in respect of confidential information concerning clients which becomes known to the professionals as a result of their providing advisory and representative services.
Law 19/1988 on auditing financial statements obliges auditors to keep confidential all information collected for the purpose of auditing the financial statements. It includes a limited list of persons and bodies who can access the audit papers. These are mainly the Institute of Audit and Accounting - ICAC - which is the regulator for Spanish auditors, those acting pursuant to a court order and, as recently amended by Law 44/2002 on measures for reforming the financial system, other regulatory authorities such as the Spanish Central Bank or the Spanish Securities Exchange Commission. Lastly, the list also includes (using an expression with a very broad and unclear meaning): "any persons authorized by law", although it does not expressly mention the tax authorities.
The Supreme Court, in its recent decision, takes the view that the tax authorities are "authorized by the General Taxation Law" to access audit papers to the extent that they are relevant for tax purposes, although this interpretation might conflict with the exception established in the General Taxation Law itself for confidential information obtained as a result of advisory services. The courts also seem to be feeling the pressure of the latest multinational scandals in the new global economy.
Luis Manuel Viñuales (luis.manuel.vinuales@garrigues.com), Madrid
