The Costaş, Negru & Asociaţii law firm welcomes with satisfaction a recent legal solution that seems to outline a case law of the criminal courts that disqualifies the concerted operation between the tax authorities and the criminal investigation bodies aiming at recovering the prejudice from legal or natural persons suspected of committing tax evasion offenses.
Thus, on the 13th of March 2019, the Cluj Tribunal – Criminal Section granted the challenge against the freezing order concerning the movable and immovable goods of the suspect investigated for committing the offense of tax evasion, a deed referred to and sanctioned by article 9 paragraph (1) letter c) of Law no. 241/2005, and ordered their annulment.
In the present case, by ordinance of 17th June 2015, the Prosecutor’s Office in Cluj ordered the initiation of criminal prosecution in rem for committing the offense of tax evasion, referred to and sanctioned by article 9 paragraph (1) letter c) and paragraph (2) of Law no. 241/2005, applying article 41 paragraph (2) of the Criminal Code of 1969 and article 5 of the current Criminal Code. Then, by ordinance of the 30th of August 2018, the Prosecutor’s Office ordered the confirmation of the procedural measure of further prosecution – the continuation of the criminal prosecution in personam – against the suspect, for the offense of tax evasion, referred to and sanctioned by article 9 paragraph (1) letter c) and paragraph (2) of the Law no. 241/2005, applying article 41 paragraph (2) of the Criminal Code of 1969 and article 5 of the current Criminal Code. In this context, it was essentially stated that between January 2012 and January 2014, as the administrator of company X, at different time intervals, but within the same criminal judgment, accounted repeatedly as expenses 647 tax invoices attesting the carrying out of commercial operations of purchase of goods and services, alleged to be carried out with various companies, with the consequence of producing a prejudice of 1,012,415 in VAT and profit tax. The Maramureş Administration of Public Finances, through an address issued on the 25th of March 2015, became a civil party within the criminal proceedings, claiming the sum of 1,356,632 lei representing the presumed value of the prejudice caused to the general consolidated state budget by the tax evasion offense in question, of which the amount of 1,012,415 lei represents the prejudice caused in VAT and profit tax. Considering the provisions of article 11 of Law no. 241/2005 (according to which, in case of committing tax evasion offenses, the taking of precautionary measures is mandatory), the amount of the prejudice caused and claimed, as well as the fact that there was evidence outlining the reasonable doubt of committing the aforementioned deed by suspect X, as an associate and administrator of company Y, in order to guarantee the recovery of the prejudice caused to the consolidated state budget, concluded that a distraint upon property should be applied. Based on these arguments, by order of the 31st of August 2018, the Prosecutor’s Office ordered the establishment of the distraint upon the movable and immovable property owned by the suspect in order to guarantee the recovery of the prejudice caused by the tax evasion deed in question, for the amount of 1,359,632 lei.
Analysing the facts, we found that the freezing order concerned the amount of 1,359,632 lei, as imposed by the Prosecutor’s Office on the 31st of August 2018.
The purpose of the precautionary measures referred to in article 249 paragraph (1) of the Criminal Procedure Code is to avoid the concealment, destruction, disposal or dissipation of the above-mentioned assets. Thus, according to article 249 of the Criminal Procedure Code, “The prosecutor, during the criminal investigation, the Preliminary Chamber Judge or the Court, ex officio or upon request by the prosecutor, during preliminary chamber procedure or throughout the trial, may order asset freezing, by a prosecutorial order or, as the case may be, by a reasoned court resolution, in order to avoid concealment, destruction, disposal or dissipation of the assets that may be subject to special or extended confiscation or that may serve to secure the penalty by fine enforcement or to pay court fees or to compensate damages caused by the committed offense. (2) Asset freezing consists of freezing movable and immovable assets, by establishing distraint upon such”.
It should be noted that, in case of committing tax evasion offenses, as mentioned by the prosecutor’s ordinance as well, the taking of the precautionary measures is mandatory, according to the provisions of article 11 of Law no. 241/2005.
We have brought to the attention of the Judge for Rights and Freedoms the following issues that the suspect brought to the attention of the criminal prosecution bodies, but have not been capitalized, remaining echoless:
- It is claimed that by the address of the 25th of March 2015, the tax authorities officially communicated the becoming of a civil party within the criminal proceedings, with the purpose of recovering the amount of 1,359,632 lei, which includes the basic debts of VAT and profit tax.
- On the same date, on the 25th of March 2015, the Maramureş Administration of Public Finances issued the tax inspection report and the notice of assessment issued following the tax inspection carried out at company Y, between the 18th of November 2014 and the 16th of March 2015, the verified period being the 1st of January 2011 – the 31st of December 2014, establishing additional tax obligations for company Y up to 654,855 lei, of which a main debit of 1,275,357 lei and additional obligations in the amount of 379,498 lei.
- At the same time, although we find ourselves in the presence of a civil party claim made by the Maramureş Administration of Public Finances on the 25th of March 2015, the date when the tax inspection report and the taxation decision for company Y were issued, the tax authority would never intervene again in the criminal proceedings to communicate to the criminal investigation authorities that the alleged prejudice does no longer exist, since company Y has paid all the established tax obligations following the tax inspection.
- The suspect’s claims have been proven by not less than 3 tax certificates issued to company Y from 2015 until the end of 2018. Each tax certificate attested the fact that Y had no tax obligations at all.
- The prejudice based on which the tax authority became a civil party in this criminal case is, in part, the tax obligations we referred to earlier and whose value is higher than the alleged prejudice, not to mention that the payment has been made since 2015.
- Nevertheless, the criminal investigation authorities have not undertaken any minimum checks, introducing measures of distraint upon property illegally and abusively, under the protection of article 11 of Law no. 241/2005.
- Thus, we found ourselves in the inadmissible case in which the alleged prejudice was paid by company Y, and then, in 2018, the asset freezing was ordered to guarantee the recovery of 1,359,632 lei from the suspect’s personal assets.
- This way of working leads us to the assumption that the same amount is being recovered, which finally reaches the state budget, as follows:
- First, the tax obligations set out for company Y by the tax inspection report and the taxation decision issued on the 25th of March 2015 by the Maramureş Administration of Public Finances, were recovered from the company in 2015.
- On the same date (the 25th of March 2015), the Maramureş Administration of Public Finances notified the criminal investigation authorities and became a civil party with the amount of 1,359,632 lei as a part of the additional tax obligations set at 1,654,855 lei, seeking the recovering of this amount from suspect X. These amounts, of course, would also go to the state budget.
Article 4 of Protocol No. 7 stipulates as follows:
- “No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State.
- The provisions of the preceding paragraph shall not prevent the reopening of the case in accordance with the law and penal procedure of the State concerned, if there is evidence of new or newly discovered facts, or if there has been a fundamental defect in the previous proceedings, which could affect the outcome of the case.”
Article 50 of the Charter of Fundamental Rights of the European Union reads as follows: “No one shall be liable to be tried or punished again in criminal proceedings for an offence for which he or she has already been finally acquitted or convicted within the Union in accordance with the law.”
In order to study the applicability of these legal provisions, in support of our procedural stand, we first referred to the judgment of the Court of Justice of the European Union (Grand Chamber) of the 26th of February 2013 in Case C-617/10 Åklagaren (Public Ministry) v. Hans Åkerberg Fransson.
Then, we put forward similar examples offered by the European Court of Human Rights, once issuing the following judgments:
- judgment of the 27th of November 2014, Lucky Dev v. Sweden
- judgment of the 27th of January 2015, Rinas v. Finland
- judgment of the 10th of February 2009, Sergey Zolotukhin v. Russia
- judgment of the 21st of October 2014, Lungu v. Romania.
We believe that all these judgments lead to a single conclusion: as long as the same facts are being analysed within two separate proceedings and the recovery of the same amounts is sought, although based on different formal claims, as in the present case, article 4 of the Additional Protocol no. 7 to the Convention is obviously violated.
We must also take into consideration, in this context, article 249 paragraph (5) of the Criminal Procedure Code, according to which the precautionary measures taken in order to repair the damage caused by committing the offense and to guarantee the execution of the judicial costs may be taken upon the suspect or defendant’s property, as well as upon the assets of the party with civil liability, to the extent of their probable value. According to the ordinance of the Prosecutor’s Office, the enforcing of the distraint (asset freezing) was made in order to guarantee the recovery of the damage.
Therefore, the ordinance of the 31st of August 2018 and the subsequent record issued on the 8th of November 2018, which ordered and then enforced the distraint measure, appeared to be abusive, unjustified and unlawful, as long as:
- there is no prejudice, the tax obligations being fulfilled by company Y ever since 2015;
- the obligation is of a tax nature and its source is identical, the difference being given by the title only: on the fiscal side, the additional tax obligations have been extinguished following their payment, yet on the criminal side, the recovering of the prejudice is being sought.
In view of all these aspects, we asked the Judge for Rights and Freedoms to order the annulment of the ordinance and the record through which unjustified precautionary measures were enforced upon the suspect’s assets.
After many (failed) attempts of the Prosecutor’s Office to combat the suspect’s procedural stand and after numerous inquiries to the tax authorities, we came to the point where, based on our assertions:
- The tax authority no longer claims to be a civil party within the criminal proceedings, expressly mentioning that the prejudice was paid by company Y;
- The Prosecutor’s Office was put in a position to uphold the admission of the contestation formulated by the suspect against its own measures of enforcing the freezing of assets;
- The Judge for Rights and Freedoms annulled the ordinance of taking the precautionary measures and the record of enforcing the distraint upon the movable and immovable assets of the suspect investigated for tax evasion.
We believe that this solution is extremely important for clarifying the legal practice in situations in which the prejudice actually arises from tax matters, and the tax liabilities no longer exist (either as a result of the annulment of the tax obligations or as a result of the tax obligations being extinguished).
The client was and is still legally represented in the criminal proceedings by Ms. Lia Pricope of the Costaș, Negru & Asociații lawyers’ civil partnership.