APPLICATION OF THE GENERAL CLAUSE OF REASONABLENESS AND CRITERION OF RATIONALITY IN POLISH TAX LAW

This paper’s objective is to present two methods of introducing elements of the civil general clause of reasonableness into tax law. One of them is the lawmaking process, the other is the application of law, i.e. the decisions of tax authorities and the jurisprudence of national administrative courts.


INTRODUCTION
In some areas of legal norms of European law a new clause of reasonableness has been frequently encoded since the early eighties of the twentieth century. This clause is derived from traditional equity general clauses developed in the common law system 1 . A characteristic feature of the clause of reasonableness or, in other words, of practical rationality * Dr. habil. Monika Münnich, Assistant Professor, Faculty of Law, Canon Law and Administration, The John Paul II Catholic University of Lublin; correspondence address: Al. Racławickie 14, 20-950 Lublin, Poland; e-mail: mmunnich@kul.pl; https://orcid. org/0000-0002-9250-5748. 1 Vide: Ewa Rott-Pietrzyk, "Holenderska klauzula rozsądku i słuszności na tle innych uregulowań prawnych (wzór dla polskiego ustawodawcy?)," Przegląd Prawa Prywat-is the lack of direct reference to the universal moral and ethical criteria and values typical of bona fides, such as honesty and mutual trust, diligence, truth and equity 2 . This clause refers to ethically coloured rationality, or more precisely to the measure, which is the most effective conduct according to the current state of knowledge, aimed to achieve specific results, considering moral values, and thus what is fair in certain circumstances. According to some representatives of Polish civil literature in case of clauses of reasonableness, as opposed to traditional equity clauses, the reasonableness criterion allows for an objective assessment of contractual integrity, especially with regard to the objective reconstruction of the catalogue of obligations incumbent on the parties, enabling them to balance mutual interests 3 . It is also asserted in this literature that the clause of reasonableness can be said to be a "place and time" clause understood socially, because reason is what everyone believes to have to an appropriate degree 4 .
It seems that the first legal act in which the general clause of reasonableness was applied was the Vienna Convention of 1980 on contracts for the international sale of goods 5 . However, it should be noted that the criterion of reasonableness had already appeared in the Hague Convention of 1964 5 . This clause is also reflected in the Principles of European Contract Law, nego, no. 3 (2006) which constitute the stem of the European Civil Code 6 and in the Rules of International Trade Agreements, UNIDROIT 7 . All these documents contain the key phrases characteristic of reasonable clauses: reason, reasonable time or a reasonable person 8 . Definitely the biggest supporters of introducing general clauses based on the criterion of reasonableness and equity into the European Union legal system are the Dutch -the creators of the Dutch Code of Civil Law, from which in 1992 they definitively deleted the general clause good faith. As a result of these legislative changes in Dutch contract law, in case of interpretation of declarations of will, the basic evaluation standard is currently the model of a reasonable and honest man (reasonably prudent person) whose conduct should be protected (reasonable person test) 9 . The new general clause is closely connected with the so-called New The statements and other conduct of a party shall be interpreted according to that party's intention if the other party knew or could not have been unaware of that intention. 2. If the preceding paragraph is not applicable, such statements and other conduct shall be interpreted according to the meaning that a reasonable person of the same kind as the other party would give to it in the same circumstances. Similarly, see: 1:302 PECL: Under these Principles reasonableness is to be judged by what persons acting in good faith and in the same situation as the parties would consider to be reasonable. In particular, in assessing what is reasonable the nature and purpose of the contract, the circumstances of the case, and the usages and practices of the trades or professions involved should be taken into account. 9 Cf.: Ewa Rott-Pietrzyk, "Wzorzec rozsądnej osoby w świetle konwencji wiedeńskiej o umowach międzynarodowej sprzedaży towarów," Rejent, no. 9 (2005): 202-222; Ewa Rott-Pietrzyk, "Pojęcie rozsądku w projekcie Europejskiego kodeksu Cywilnego", 705; Andrzej Bierć, Zarys prawa prywatnego. Część ogólna, 106; Natalia Bukowska, "klauzula rozsądku w anglosaskim prawie ubezpieczeniowym oraz Restatement of European Insurance Contracts", https://docplayer.pl/7021643-klauzula-rozsadku-w-anglosaskim--prawie-ubezpieczeniowym-oraz-restatement-of-european-insurance-contracts.html (access date: 4.07.2019).
European Legal Culture, whose main characteristics is to deny the legitimacy of contemporary reference not only to the values associated with Europe's Judeo-Christian roots, but above all to the tradition and culture of the ius romanum 10 .
In Polish private law, the general clause of reasonableness has been regulated so far in several provisions of the Civil Code 11 . According to some representatives of the literature, the introduction of clauses based on a reasonable criterion to international, European and national provisions is part of the humanisation of contractual civil law, as it has unduly restricted the favored principle of safety of trade at the expense of its participants'interests 12 .

REASON -STRUCTURAL COMPONENTIN THE PROVISIONS OF GENERAL TAX LAW
In current Polish tax law regulations, the typical assessment criteria for the clause of reasonableness, such as reason and rationality, are included in  , 2006). 11 In Polish regulations, the criterion of reasonableness was normalized impersonally using such legal phrases as: reasonable time, reasonable assessment, reasonable kontent in art. 561 § 2; art. 7602 § 2; art. 7602 § 3; art. 761 § 2 i art. 7611; art. 948 § 2 of the Act on the Civil Code of 23 April 1964, Journal of Laws 2019, item 1145, as amended. These provisions regulate the interpretation of a will that allows the testator's orders to be upheld and give them reasonable content. In the personal form, however, the reasonableness clause was also regulated in art. 84 § 2 of the Civil Code, i.e. in the provisions regarding the determination of the significance of an error as a defect in a declaration of intent in which the expression occurs, assessed the case reasonably.
12 C.f.: Ewa Rott-Pietrzyk, "Pojęcie rozsądku w projekcie Europejskiego kodeksu Cywilnego," 707. the provisions of the Tax Ordinance. The first one (reason) was introduced into this Act along with the so-called anti-tax avoidance clause 13 , and it can be found in the following provisions: 1. an appropriate conduct is one that an entity could under certain circumstances be engaged in, if it was conducted reasonably and was guided by lawful purposes other than gaining tax advantage contrary to the object or purpose of the Tax Act or its provision, and the mode of conduct would not be artificial 14 , 2. the mode of conduct is not artificial, if on the basis of existing circumstances it should be assumed that an entity, acting reasonably and legally, would use this mode of conduct predominantly for clearly justified economic reasons 15 ; 3. the assessment that the mode of conduct was artificial may be provided in particular by the occurrence of:… economic risk exceeding the expected non-tax benefits to such an extent that it should be considered that this conduct would not have been chosen by a reasonably operating entity 16 . It should be added that the normative model on which the Polish legislator relied directly was the British anti avoidance general clause, referring to the notion of reasonableness 17 .
Apart from the provisions applicable since 2016, the expression of reasonableness (referring to circumstances and conditions) was used in regulations added to the new tax provisions governing so-called additional liability. Under these provisions: the assessment that the taxpayers acted in good faith can be proved by the fact that they did not run any business at all, or in a limited scale. Therefore, it could not be reasonably expected that in relation to the conduct the decision concerned, which is referred to in section 1 of this paper, the taxpayer will need any professional advice on tax consequences. Additionally, the criterion of reason has also been found in the provisions regulating the institution of tax schemes 18 since 2018, it reads: 1. (...) on the basis of existing circumstances, it should be assumed that a reasonably functioning promoter or beneficiary to whom the obligations provided for in the provisions of this chapter would not apply, would like at least one of the obligations set out in separate provisions of this Act to be actually respected 19 , 2. the main benefit criterion is considered to be met if, on the basis of existing circumstances and facts, it should be assumed that an entity acting reasonably and with lawful purposes other than achieving tax benefit could legitimately choose other rules of conduct which would not involve a reasonable tax benefit expected or resulting from the implementation of the agreement, and the tax benefit is the main or one of the main benefits that the entity expects to receive in connection with the implementation of the agreement 20 . In all provisions of the Tax Ordinance, a characteristic of the clause of reasonableness, evaluative and indeterminate expression -reason -was used primarily in relation to a reasonable person, with the focus on the aforementioned basic evaluation standard, i.e. the model of a reasonable and honest man. Undoubtedly, the judgment criterion of reason used in the provisions creates for the legal interpreters, who construct the operative interpretation (i.e. tax authorities and administrative courts), a platform for dynamic interpretation. This is even more important because the common feature of these provisions is their anti-abusive nature.

CRITERION OF RATIONALITY AND REASON IN THE INTERPRETATION OF PROVISIONS REGULATING TAX DEDUCTIBLE COSTS
The criterion of reasonable or rational conduct of the taxpayer is a completely different issue related to the legal structure, that is to tax deductible costs. This institution is normalized in two acts regulating both individual and corporate income tax. According to their content, tax deductible costs are the costs incurred to receive revenue from a revenue source or to maintain or secure a source of revenue, except for the costs listed in separate regulations 21 .
The language interpretation of the provisions cited leads to the conclusion that the condition for recognizing a certain expense as tax-deductible is the existence of two combined circumstances, in which: -expenditure incurred should be made in order to generate and maintain or secure a source of revenue, and -the expenditure incurred cannot be included in the negative catalogue, comprising non-deductible expenses 22 . Unfortunately, provisions regulating the legal definition of tax deductible costs are not correctly and unequivocally formulated, which contributes to the fact that taxpayers who have the basic and widest scope of responsibility for their correct interpretation have had (from the moment this institution started to function in tax law, i.e. in 1991 and 1992) numerous problems with their observance and correct application 23 .The range of tax- Such extremely different qualifications of one legal structure by interpreters in the course of applying the law is not only a dogmatic problem. It concerns the effects and limits of the interpretation of law. The law interpreter may use different interpretative directives in case of legal material definition, and in case of provisions in the general clause referring to non-legal assessments and values. Such a dichotomous vision of the legal structure in question is contrary to the positivist concept of the rational legislator.
Referring to the definition of tax-deductible costs, it should be noted that, according to the intention of the legislator, in the current definition of the legal institution of tax-deductible costs, clear emphasis was placed on the fact that tax costs are only these costs the taxpayer incured in order to: -generate revenue or -maintain or secure the source of revenue as long as they do not belong to the catalogue of negative expenses not qualified as tax deductible costs.
In both jurisprudence and tax publications, the following circumstances are most often indicated as conditions fulfilling the semantic scope of the normative expression "in order to": 1. the costs incurred by the taxpayer shall be related to the gained revenue and shall be definitive 25 ; 2. there shall be a direct or indirect 'cause and effect' relationship between expences and revenue 26 ; 3. this relationship shall be properly (reliably) documented 27 . When assessing the relationship between expenditure and business activity, the taxpayer should assume that a potential cost may objectively contribute to generating revenue. In addition, it should be remembered that the taxpayer recognizing expenses as tax deductible costs has obvious benefits, because the tax base is reduced by this cost. Therefore, the taxpayer bears the material burden of proving that a certain expense is tax deductible. The taxpayer makes economic decisions, taking into account the economic risk and financial resources at his disposal to generate revenues.
This purposefulness of incurring tax costs is usually supplemented with other vague phrases, such as rationality or reasonableness, both in jurisdiction and in literature. It should be emphasized that such an assessment criterion referring to the economic area is not a new interpretative phenomenon. The identification of the taxpayer's purposeful performance with rationality was already evident in court judgments in the second half of the nineties. Without doubt, both in judicial decisions and interpretations of tax authorities, as well as in literature, this interpretative trend is gaining momentum and, instead of examining the "purposefulness" of expenditure, courts and authorities more often analyse circumstances indicating, for example: -rational 28 or irrational conduct of the taxpayer 29 , -rationality of conduct to generate revenue 30 , -rationality in incurring expenses 31 , -irrationality of conduct from an economic perspective 32 , -compliance with the principles of rational reasoning 33 , -using reason in deducting expenses 34 , -rationality and economic justification of expenses related to business operations 35 . It should be noted that both concepts of rationality and reason are not standardised in provisions regulating the content of tax-deductible costs. These are typical expressions in literature, so called estimated returns of economic provenance, the purpose of which is to enable an individual assessment of the taxpayer's operation in a particular situation. Both in judicial decisions and in tax interpretations, these semantic evaluation criteria used in various configurations: rational/ irrational expenditure, conduct or reason are generally not explained, so in consequence the interpreters are limited to their basic linguistic meaning.
As a rule, court judgments indicate that the rational conduct of an entrepreneur is understood as an activity performed on the basis of the state of knowledge the taxpayer had at the time of incurring the expenditure, taking into account the high probability of revenue 36 . Both tax authorities and courts, very often interpreting tax deductible costs as justified, consider only rationally and economically justified expenses and expenses related to the economic activity of the taxpayer who, by incurring them ("in order to") aims to gain revenue from this source. In the jurisdiction, it is asserted that the taxpayer should demonstrate this purposefulness of incurring expenditure, and above all, that the expenditure was incurred rationally, i.e. that the taxpayer in return for this expenditure, has actually obtained certain goods and that they could rationally or at least hypothetically generate revenue 37 .
The analysis of cited legal judgements clearly indicates that the judgemental and vague rationality criterion of conduct or reason, in incurring expenses, is interpreted by the courts through the prism of praxeology, i.e. the science of conscious and intentional human activity. This way of understanding the rationality of taxpayer's conduct actually directs the interpreting entity to an objective method of assessing taxpayer's conduct. In other words, the rationality of taxpayer's conduct is understood technically by national administrative courts. Rational conduct is the one, that takes into account the objective possibility of generating revenue or maintaining or securing the source of revenue.
Consequently, the question arises why in recent years tax authorities and courts, when assessing taxpayers' conduct and determining the scope of their responsibility regarding the amount and legitimacy of costs incurred, place such a considerable emphasis on issues related to the rationality of taxpayer's conduct and reasonableness in going to expenses.
It seems that there are several reasons that can be compressed to one conclusion, dangerous for the taxpayer and justified on fiscal grounds. The economic reality is becoming more and more complex and eluding traditional normative constructions containing a limited number of vague phrases, such as the definition of tax-deductible costs, which is quite hermetic and casuistic in comparison with other recent tax solutions. In consequence, it seems to be less and less applicable to the emerging new forms and economic correlations enabling the taxpayers to make progressive economic turnover.
Therefore, the entities making interpretations recognise that this literal content of the provisions indicates that the expense incurred "in order to achieve, maintain and secure…", should be made more flexible and should be interpreted by means of more open meaningful terms referring to the area of rational, reasonable and economically justified taxpayer's conduct.

CONCLUSIONS
All things considered, it must be noted that the excessive use of the estimated returns with strictly economic origin in the interpretation of the legal definition of deductible costs can have far-reaching consequences for taxpayers. Without doubt, traditional normative constructions of tax law, typical of public law, have been undergoing fundamental transformation lately. This process involves absorbing and using autonomously solutions typical of private law. This phenomenon occurs bipolarly. Firstly, it takes place, as indicated in this paper, in a traditional way, i.e. in the process of tax law-making. Secondly, however, certain solutions typical of both private law norms and its legislation are transplanted into tax law in the course of its application. The best example of this procedure is the introduction of the civil law clause of good faith into the European VAT system by CJEU case -law.
It is predictable that in the near future it may turn out that the application of both judicial and administrative practice will contribute to the desirable legislative solution for purely pragmatic reasons. There may be such a change in the content of the regulations on tax costs, that the present legal definition will be replaced with a new normative construction based on the general clause of reasonableness. Under the existing jurisprudence doctrines, it can be assumed that the content of the new provisions could read as follows: tax deductible costs are reasonable and economically justified costs incurred to generate revenue from the source of revenue or to preserve, or secure the source of revenue. Undoubtedly, the proposed technical and legislative change would allow taxpayers or tax authorities, and courts to assess expenditure on the basis of purposeful or rather economic interpretation of the two essential expressions, i.e. reasonable and economic justification of the expenses incurred. However, such a change should be preceded by in-depth theoretical and legal research on the directions of interpretation of the clause of reasonableness, which is barely known in Poland.