What does the Romanian Constitutional Court decide on preventing and combating tax evasion?
In the following we will approach an objective exposition of the controversial aspects included in Decision no. 101/2021 of the Constitutional Court, which rejected the notifications of the High Court of Cassation and Justice, Government and People’s Advocate and found that the draft adopted by the Chamber of Deputies amending Law 241/2005 to prevent and combat tax evasion is constitutional.
The changes operated by the criticized law:
The criticized law modifies Law no. 241/2005 for preventing and combating tax evasion, in the sense that it eliminates the causes of reduction of the prison sentence and regulates the main alternative punishment of the fine for the offenses from art. 8 and 9.
The application of the fine may be ordered if during the criminal investigation or trial the damage caused is fully covered, and its value does not exceed 100,000 euros, in the equivalent of the national currency.
If the damage caused and recovered under the same conditions is up to 50,000 euros, in the equivalent of the national currency, the penalty with a fine is applied.
Therefore, a special case of optional or mandatory application, as the case may be, of the main penalty of the fine was regulated.
A cause of impunity is also regulated, which applies if, during the criminal investigation or during the trial until a final judgment is pronounced, the damage caused by committing the deed, increased by 20% of the calculation base, to which are added the interests and penalties, is fully covered; in this case, the deed is no longer punishable.
The special cause of application of the main penalty of the fine and the cause of impunity apply to all defendants, even if they did not contribute to the coverage of the damage.
From the analysis of the criticisms of unconstitutionality formulated, it results that the law is criticized both as a whole, in terms of its adoption procedure, and in terms of its normative content.
Criticisms of extrinsic unconstitutionality regarding the violation of the principle of bicameralism within the procedure of reviewing the law:
The review concerns legal provisions found to be unconstitutional, except in cases where (i) other provisions are inextricably linked to the provisions declared unconstitutional or (ii) other provisions which, although not in an indissoluble relationship with them, they must be recorrelated as a result of the changes made in order to agree with the decision of the Constitutional Court. In the latter case, however, the change made for the purpose of recorrelation cannot be one that concerns the substance of the law.
A first change operated in the re-examination procedure was the introduction of a cause of impunity, respectively: “In case of committing one of the offenses provided in art. 8 and 9, if during the criminal investigation or during the trial until the pronouncement of a final court decision, the damage caused by committing the deed, increased by 20% of the calculation base, to which are added the interests and penalties is fully covered, the deed is not it still punishes. The provisions of this article apply to all defendants even if they did not contribute to the coverage of the damage ”.
On the occasion of the re-examination, the Chamber of Deputies, as the decision-making Chamber, also established as a sanction for the offenses related to tax evasion, the penalty of the fine.
THE COURT NOTES that the criticized law does not violate the principle of bicameralism, as the form adopted by the decision-making Chamber refers to the main aspects of the bill in its form adopted by the Chamber of Reflection. The changes brought to the form adopted by the Chamber of Reflection include a legislative solution that preserves its overall conception and does not deviate from it, being better articulated in the whole law.
THE SEPARATE OPINION states that:
During the procedure of re-examination of the law, the principle of bicameralism provided by the Constitution was violated and thus the law had to be declared unconstitutional as a whole.
Following the re-examination, a series of amendments were made in the content of the law that do not concern provisions found to be unconstitutional by the decision previously handed down by the Constitutional Court, provisions that are neither inextricably linked to them nor were they even imposed. to be recorrelated as a result of the changes made in order to agree with the decision of the Court, but, on the contrary, enshrine new legislative solutions, thus exceeding the limits of the review provided by the Constitution.
Criticisms of intrinsic unconstitutionality regarding:
1. PENALTY OF A FINE:
Establishing the fine as an alternative to imprisonment can empty the content of the latter punishment, raising serious issues from the perspective of regulating the deterrent nature of criminal sanctions.
It is shown that art. 8 contains two crimes: the first aims to protect social relations regarding the collection of budget revenues, which implies an honest conduct of taxpayers, and the second, the association to commit the crime of obtaining without right amounts of money from the general consolidated budget.
THE COURT NOTES THAT:
From the corroboration of art. 8 para. (2) and art. 10 of the criticized law results that: (i) for a damage of over 100,000 euros, the judge applies only the main punishment of imprisonment; (ii) for an uncovered injury, the judge applies only the main sentence of imprisonment; (iii) for a covered damage between 50,001 – 100,000 euros, the judge may apply the main penalty of the fine; (iv) for a covered damage between 1 – 50,000 euros, the judge applies the main punishment of the fine.
Thus, the main penalty of the fine can be applied only if the damage caused is fully covered and its value does not exceed EUR 100,000 in the equivalent of the national currency and must be applied if the damage caused is fully covered and its value is not exceeds 50,000 euros. The main penalty of the fine cannot be applied in any way to damages higher than 100,000 euros.
Parliament has the power to decriminalize, in tax matters its margin of appreciation is wide in the adoption of such measures and decriminalization in this matter does not directly affect the fundamental rights or freedoms of other subjects of law. Choosing the most appropriate formulas to recover the damage caused to the state budget is an uncensorable option on grounds of constitutionality, highlighting issues of opportunity and criminal policy.
SEPARATE OPINION states that, by providing in the criticized law the penalty of the fine alternatively with the punishment of imprisonment of up to 15 years for the offenses provided in art. 8 and 9, the law contravenes the constitutional provisions regarding the rule of law, which obliges the legislator to take adequate measures in order to defend public order and safety, by adopting the necessary legal instruments in order to reduce the criminal phenomenon.
2.QUALIFICATION OF THE CAUSE OF NON-INFRINGEMENT AS REAL:
The full coverage of the damage by the perpetrator of the crime of tax evasion, committed at a time after the commission of the act, is a manifestation of the conduct after the crime and during the criminal process, which the legislator described as a cause of impunity / reduction of limits of punishment, personal.
The qualification of the cause of impunity as a real one, applicable to all defendants violates the principle of legality of punishment and the principle of individualization of criminal law sanctions, as it allows the application of impunity to all defendants, even if they did not contribute to cover the damage.
THE COURT NOTES that in the present case, the legislator did nothing but convert a personal circumstance into a real one justified by the aim pursued – the speedy recovery of the damage caused to the state budget.
It does not matter whether one of the defendants covered the damage caused or whether several defendants covered that damage; moreover, it would be difficult to imagine that all the defendants would each cover the full damage caused, because in that case the damage would have been recovered several times, or that each would have to pay a share because it is not possible to determine mathematically the share of each.
Therefore, the legislator translated these causes of impunity / application of the penalty of the fine into the sphere of real circumstances. It is a special regulation that encourages defendants to cover the damage.
THE SEPARATE OPINION considers that, by qualifying the cause of impunity as a real one, the constitutional standards are violated.
Assuming that some of the participants are tried and convicted of tax evasion, and later other participants in the same crime are discovered and at least one of the latter pays the damage, the question arises whether the persons already convicted and who possibly have executed part of the sentence, a lighter sentence can be applied to them, respectively the fine or a cause of impunity.
It is argued that the law must provide the magistrate with tools to enable him to determine a specific sanction, taking into account the particularities of the crime (motive of the crime, tools used, the result produced, a possible concurrence of crimes) or the circumstances of the perpetrator (his attitude after committing the deed, as well as his attitude during the criminal trial, his education, his possibilities for social reintegration, the state of post-conviction or post-execution recidivism).
However, the fact of establishing, by law, a single punishment, such as that of a fine, can result, in many cases, in infringements of certain fundamental rights as a result of the disproportionate nature of the punishment in relation to the act committed.
Also, the elimination of the judge’s ability to determine the duration or amount of the sentence and to assess from case to case the seriousness of the act and the dangerousness of the perpetrator by reference to the general criteria of individualization provided by the Criminal Code can only lead to creating unfair situations in practice regarding the sanctioning treatment of the crime, leaving the judge without one of his most important prerogatives in carrying out the act of justice.
THE COURT NOTES that the criticized law does not establish fixed punishments and does not affect the judge’s competence to judicialize the deed, but regulates, depending on the applicable normative hypothesis, only the prison sentence, alternatively the prison sentence with that of the fine and, finally, only the sentence fines.
4.VIOLATION OF THE RULE OF LAW by the fact that the new wording of art. 10 will encourage the commission of the offenses provided by art. 8 and 9 of Law no. 241/2005:
THE COURT CONSIDERS THAT the criticized norm does not represent an invitation to violate the law, but includes a form of civil sanction, so that the one who affected the integrity of the public budget will have to pay the damage actually suffered by the state budget, increased by 20%, plus they will pay interest and penalties. This increase is a form of civil sanction that punishes deviation from the rules of law.
SEPARATE OPINION states that:
The facts of tax evasion present a major danger for social relations in the field of collection of taxes and duties by the competent state authorities.
The criticized law is able to attenuate much the deterrent effect of the punishments applicable in the case of tax evasion crimes with the consequence of encouraging the criminal phenomenon, of increasing the number of persons who will commit acts of tax evasion.
Tax evasion is a dynamic phenomenon, which takes many different forms:
Legal tax evasion involves evading taxpayers from paying taxes, by invoking legal grounds, such as legislative loopholes.
Illegal tax evasion consists in evading taxpayers from paying their tax obligations, most of the time by using illicit means.
The real tax evasion represents the value of the damage caused to the state budget by all the evasion acts committed in a determined time interval.
Tax evasion itself consists in evading the payment of budgetary contributions due in connection with revenues from lawful activities.
Tax evasion by carrying out illegal activities consists in carrying out illicit activities producing income for which no taxes and fees are paid.
Tax evasion by carrying out underground activities is a form of tax evasion that materializes in the realization of legal income, but which are hidden from the authorities.
Internal tax evasion is the form of evading taxpayers from paying taxes by means located in the national territory.
International tax evasion consists in evading taxpayers from paying their tax debts according to the domestic tax system by using tax havens or offshore jurisdictions.
Among the causes of tax evasion, in the specialized legal literature are listed the deficiencies of the fiscal legislation, the fiscal burden, the lack of harmonization between the state institutions involved in the fiscal administration and the inefficiency of the fiscal control institutions.
THE COURT rejects, as unfounded, the objection of unconstitutionality and finds that the provisions of the Law on amending and supplementing Law no. 241/2005 for preventing and combating tax evasion are constitutional in relation to the criticisms made.
SEPARATE OPINION formulated by two of the judges, in disagreement with the solution pronounced by the Court, with a majority of votes, considers that the objection of unconstitutionality of the Law on amending and supplementing Law no. 241/2005 for the prevention and combating of tax evasion was required to be admitted, as the principle of bicameralism was violated in the procedure of re-examination of the law, so that the law had to be declared unconstitutional as a whole.
Atty. Florina-Iasmina Căiniceanu