Latvia's Supreme Court rules on tax authority's data collection before formal audits
Latvia's Supreme Court has issued a landmark ruling addressing how much information the State Revenue Service may gather about a taxpayer before formally notifying them that an audit has begun.
The case stemmed from a dispute over income earned from selling puppies, in which it emerged that a state authority had already collected information about the person's bank accounts and reviewed their social media activity, even though the individual had not been informed that a tax audit was underway. The matter reached the Supreme Court, which was asked to resolve a fundamental question: whether state institutions may lawfully gather and analyze data about an individual before a formal audit procedure is officially opened, and where the line lies between the state's oversight powers and a person's right to privacy in the digital era.
Such disputes are becoming increasingly common, as technological advances make it far easier for authorities to access details about people's financial dealings and online social activity, while existing legal rules do not always clearly define when this kind of data gathering becomes disproportionate or unlawful.
The court's decision has been described as unwelcome news for tax inspectors, suggesting that the ruling limits or clarifies the extent and timing of the information state bodies may collect about a specific person before that person is officially told they are being checked.
The ruling could have implications well beyond the original case about puppy-trading income. It may affect any situation in which state authorities seek to examine a person's income or business activity using bank records or publicly available social media information, potentially setting a precedent for future cases assessing whether such actions by authorities comply with principles of legality and proportionality.
