Tax Penalties Don´t Protect Against Criminal Prosecution

Czech Republic: Supreme Court confirms: tax sinners who were punished by the finance office may still be prosecuted under criminal law provisions.

In November 2015, the public took note of a judgment by the Supreme Administrative Court according to which fines imposed pursuant to the General Fiscal Code constitute “punishment” by nature, similarly to fines under criminal law or imprisonment. In the wake of that judgment, those who apply the law inferred that, because of the principle of double jeopardy (in its continental-law manifestation of “ne bis in idem”), individuals who were already penalized with a fine in tax administrative proceedings cannot be prosecuted under criminal law. However, the Supreme Administrative Court did not at the time address the possibility of parallel or consecutive tax proceedings and criminal proceedings.

In a current ruling, the Grand Senate of the Supreme Court allowed for the criminal prosecution of an individual who had already been punished for tax evasion by the finance office, stating that the principle of ne bis in idem is not being violated if the two types of procedure supplement each other, focus on different aspects of the given unlawful conduct, and are interconnected in terms of subject matter or of the timeline. Having said that, the justices stressed that the perpetrator must not be exposed to undue pressure; if the criminal judgment is preceded by sanctions imposed in tax proceedings (and those were duly discharged), then this must be reflected when determining the punishment.

The Grand Senate of the Supreme Court at the same time upheld prior case law according to which a perpetrator cannot invoke active repentance to relieve themselves from criminal liability for their deeds if they only fulfilled their tax obligations as a consequence of a tax audit or under the pressure of criminal prosecution having been initiated, as such performances are no longer rendered voluntarily and of their own accord, but only under the threat of penalties.

The decision of the Grand Senate of the Supreme Court was handed down in a procedure which originated before the Liberec District Court, concerning a man who had evaded almost 1.4 million crowns in taxes. He became suspected of the crime of tax evasion in the wake of a tax audit after which the finance office issued payment summons in which it assessed supplementary tax and penalties, but also notified the public prosecutor of facts suggesting that a crime was committed. In response, the police began to prosecute the case under criminal law. The man meanwhile paid up the supplementary tax with penalties, but continued to face criminal prosecution. The courts in Liberec imposed no further punishment, but did find the man guilty.

The man appealed on a point of law, objecting that his criminal prosecution had been inadmissible under the law. In particular, he believed that the imposition of a fine by the tax authorities created an obstacle with respect to prosecution of the criminal offense of “evasion of taxes, fees, and other mandatory payments”, in that the already decided matter had the effect of ne bis in idem. However, the man’s appeal was unsuccessful: the Supreme Court conceded that the tax procedure and the criminal prosecution were at their heart procedures over the same series of actions, but held that parallel or consecutive tax procedures and criminal procedures (being principally procedures of “penal-law character) do not create an obstacle in the sense of ne bis in idem if there exists a sufficiently close interconnection in terms of the subject matter of both proceedings and at the same time a close temporal connection. In this respect, the Supreme Court referenced a decision handed down last year by the European Court of Human Rights in Strasbourg which in the case of two Norwegian citizens ruled that being convicted of a tax crime after a prior tax penalty constituted no violation of the ne bis in idem principle. This is because the two sanctions pursue different objections; tax penalties serve a preventative and coercive purpose, whereas criminal prosecution moreover serve a repressive goal.

In other words, those who evade tax may (under the above circumstances) be punished both by the finance office and the court.


Source: Supreme Court decision 15 Tdo 832/2016

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