Abstract

In this article, the author aims to analyze the legislative amendment project PL-x 805/2023, transmitted by Parliament for promulgation to the President of Romania. Through this proposal, the legislator suggests shifting the focus in cases of economic offenses from imposing custodial sentences towards the recovery of damages and their reintroduction into the economic cycle.

Section 1. Introduction

Tax evasion is a global scourge, and Romania is not immune to this phenomenon. Combating tax evasion is a goal of every state. The transition to a legal economy for activities carried out by traders concerns or should concern the Romanian legislature. One such concern should be the adaptation of legislation and the creation of a system that allows for the efficient recovery of evaded funds.

Creating legislative systems that enable the recovery of evaded funds and facilitate the easier sanctioning of tax evasion can lead to an increase in the recovery rate of damages incurred by the state and may also help reduce the phenomenon.

Through the amendments to Law 241/2005, the Romanian legislature aimed to introduce mechanisms capable of recovering funds evaded by traders on Romanian territory. In this regard, several legislative measures were adopted that allowed for the application of reasons for reducing penalties or even non-punishment if the damage is fully covered, including late penalties and a percentage set by the legislature.”

To encourage the recovery of damages resulting from evasive behavior, Law 55/2021 amended Law 241/2005 by introducing provisions that allow for less severe sanctions or even non-punishment in cases where the damage is fully paid, establishing that:

a) In cases of tax evasion offenses specified under Articles 8 and 9, if the damage caused is fully covered during the criminal investigation or trial, and its value does not exceed 100,000 euros in the national currency equivalent, a fine may be imposed. If the damage caused and recovered under the same conditions is up to 50,000 euros, in the national currency equivalent, the punishment imposed is a fine.

b) In cases of offenses under Articles 8 and 9, if during the criminal investigation or the trial up to the issuance of a final judicial decision, the damage caused by the offense, increased by 20% of the calculation base, plus interests and penalties, is fully covered, the act is no longer punishable.

Thus, from the analysis of the legal text, we can observe that the Romanian legislator has established multiple criteria by which one can benefit from a milder sanction or even the application of a non-punishment cause, as a result of paying the damage.

The first threshold refers to situations where the damage caused as a result of the tax evasion offense specified in Articles 8 or 9 of Law 241/2005 is up to 50,000 euros in the national currency equivalent. In this case, if the perpetrator pays the damage in full during the criminal investigation or trial, the penalty of a criminal fine must be applied.

The second threshold refers to situations where the damage caused by the tax evasion offense is up to 100,000 euros. In this case, if the perpetrator covers the damage during the criminal investigation or trial, the court may impose a fine.

Unlike the first threshold, we observe that in the second scenario, the application of a criminal fine becomes optional for the court, which may choose either to impose a criminal fine or a prison sentence. It is noteworthy that according to legal provisions, the imposition of punishment can only be ordered by the court, thus the criminal prosecution authorities are obligated to send the case to trial, even if the damage up to 100,000 euros has been paid during the criminal investigation.

The third threshold refers to the situation where the person under criminal investigation pays the damage caused, plus interest and penalties, plus 20% of the damage value, in which case the provisions of Article 16 of the Code of Criminal Procedure apply, concerning the existence of a non-punishment cause for the offense of tax evasion.

From the analysis of the legal text, we observe that we are in an exceptional situation where the legislator has introduced a non-punishment cause in a special law.

Furthermore, we see that the legislator, unlike the first two situations where the damage can be paid at the latest during the trial, stipulates that the damage, along with interest, penalties, and the fixed 20% rate must be paid by the time a final decision is pronounced.

An extremely important aspect is that, in the hypothesis where the person under criminal investigation pays the damage, plus interest and late penalties, plus the 20% set by the legislator, to benefit from the non-punishment cause, it does not specify a limit to the damage caused by the commission of the tax evasion offense. In other words, they can benefit from the non-punishment cause regardless of the damage caused as a result of committing the tax evasion offense.

Through Emergency Ordinance No. 130/2021, inexplicably and from a hard-to-understand rationale, the Government of Romania has ordered the modification of provisions regarding the application of a non-punishment cause, introducing a damage threshold of up to 100,000 euros.

As a result of this legislative change, the person who committed the tax evasion offense causing damage up to 100,000 euros can benefit from the non-punishment cause, provided that they pay the damage, plus interest and late penalties, to which is added a fixed 20% of the caused damage[1].

This legislative change, lacking in inspiration and economic-legal orientation, introduced through an Emergency Ordinance to a Law, contrary to the legislative principles in the field of Criminal Law, according to which the amendment of a law should be made through a normative act of the same legal force and not through an inferior normative act, significantly reduces the scope of application of non-punishment causes and, at the same time, the chances of recovering damages created by committing tax evasion offenses.

Section 2. The Amendment Project of Law 241/2005 – Article 10

(1) In cases of offenses specified under Art. 6 ind. 1, Art. 8, or 9, if within a maximum period of 30 days from the completion of the inspection carried out by the competent authorities, during which a damage to the general consolidated budget of up to 1,000,000 euros is identified, and the damage increased by 15% of its value, along with interest and penalties, is fully covered through actual payment, the act is not punishable. In this case, the competent authorities do not notify the criminal prosecution authorities.

For the application of the non-punishment cause, the cumulative fulfillment of the following conditions is necessary:

– After the inspection by the criminal investigation authorities, they must establish a damage that does not exceed the amount of 1,000,000 euros;

– Within 30 days from the completion of the inspection by the competent authorities, the inspected person pays the damage determined by the control authorities;

– In addition to the actual damage, within the 30-day period following the completion of the inspection, the inspected person pays an additional 15% of the damage amount in the form of increases;

– Within 30 days from the completion of the inspection, the inspected person fully pays the interest and penalties related to the principal damage.

From a procedural perspective, we consider that the 30-day period begins from the moment the act through which the control authorities inform the inspected person about the completion of this activity is communicated. Only in this way can it be considered that the inspected person has been made aware of the completion of the control activity.

However, we believe that the 30-day period is too restrictive for the payment of the amount and think that extending the period to 90 days would be more appropriate for the effective recovery of the damage. Therefore, our recommendation would be to extend the payment period to at least 90 days, to avoid payment incapacity of the inspected persons who wish to pay the damage.

(2) In cases of offenses specified under Art. 6 ind. 1, Art. 8, or 9, if by the first court date, the caused damage is fully covered through actual payment, the legal sentence limits for the committed act are reduced by half. If the damage caused and recovered under these conditions is up to 1,000,000 euros inclusive, in the national currency equivalent, a fine may be imposed.

It should be noted preliminarily that in this scenario, the application of a criminal fine is optional for the court. In this case, the criminal prosecution authorities are obligated to order the case to trial, and it is up to the judge to determine whether to apply the criminal fine or a prison sentence.

It is noteworthy that in this scenario, the legislator does not expressly refer to covering interest and late penalties.

Also, it is observed that, from the interpretation of the legal text, in the first scenario, namely the reduction of sentence limits by half, the legislator has not established a maximum damage threshold, as is set in the second scenario, namely the application of a fine, where it is necessary for the damage not to exceed 1,000,000 euros.

To benefit from the reduction to half of the sentence limits, the inspected person must meet the following conditions:

– Full coverage of the damage determined through the financial accounting expert report;

– The damage coverage must occur by the first court date;

To become eligible for the application of a criminal fine, the inspected person must meet the following conditions:

– Full coverage of the damage determined through the financial accounting expert report;

– The damage coverage must occur by the first court date;

– The damage caused to the state budget must not exceed 1,000,000 euros.

According to the text from the amendment project of the tax evasion law, in cases of offenses specified under Art. 6 ind.1, Art. 8, or 9, if after the first court date and until the final judgment of the case, the caused damage is fully covered through actual payment, the legal sentence limits for the committed act are reduced by one-third.

To determine the damage, a financial accounting expertise is necessary, according to the provisions of Art. 172-180 of the Code of Criminal Procedure. According to these legal provisions, the investigated person has, among other things, the right to hire a party expert, to propose objectives regarding the expertise report, to raise objections to the resulting expertise report, and also to request the hearing of the expert or the preparation of a new expertise report.

(3) In cases of offenses specified under Art. 6 ind. 1, Art. 8, or 9, by which a damage not exceeding 1,000,000 euros, in the national currency equivalent, is caused, if during the criminal investigation, the damage caused increased by 25% of its value, along with interest and penalties, is fully covered through actual payment, the act is not punishable, applying the provisions of Art. 16 para. (1) lit. h) of the Code of Criminal Procedure.

To benefit from the non-punishment cause, the cumulative fulfillment of the following conditions is necessary:

– The damage caused to the state budget must not exceed 1,000,000 euros;

– The payment of the damage is made during the criminal investigation;

– In addition to the damage caused, the investigated person pays a percentage of 25% of the damage amount;

– The investigated person covers, in addition to the damage and the fixed 25% rate, the interest and penalties related to the principal damage.

If during the preliminary hearing procedure or the trial, up to the pronouncement of a first-instance judgment, the same damage increased by 50% of its value, along with interest and penalties, is fully covered through actual payment, the act is not punishable, applying the provisions of Art. 16 para. (1) lit. h) of the Code of Criminal Procedure.

To benefit from the non-punishment cause, the cumulative fulfillment of the following conditions is necessary:

– The damage caused to the state budget must not exceed 1,000,000 euros;

– The payment of the damage is made during the preliminary chamber procedure or the trial before the first instance;

– In addition to the damage caused, the investigated person pays a percentage of 50% of the damage amount;

– The investigated person covers, in addition to the damage and the fixed 50% rate, the interest and penalties related to the principal damage.

If during the appellate trial, up to the pronouncement of a final judicial decision, the same damage increased by 100% of its value, along with interest and penalties, is fully covered through actual payment, the act is not punishable, applying the provisions of Art. 16 para. (1) lit. h) of the Code of Criminal Procedure.

To benefit from the non-punishment cause, the cumulative fulfillment of the following conditions is necessary:

– The damage caused to the state budget must not exceed 1,000,000 euros;

– The payment of the damage is made during the appellate proceedings;

– In addition to the damage caused, the investigated person pays a percentage of 100% of the damage amount;

– The investigated person covers, in addition to the damage and the fixed 100% rate, the interest and penalties related to the principal damage.

We consider that in the scenario where the appellate court orders the re-trial of the case by the first instance, the accused can benefit from the non-punishment cause by covering the damage, a 50% rate, to which interest and penalties from the principal damage are added, since in the scenario of re-trial, the procedure starts anew.

When one of the accused covers the damage, it benefits all accused involved in the case, as stated in paragraph (4) of the analyzed article: ‘The provisions of this article apply to all accused even if they did not contribute to covering the damage specified in paragraphs (1) and (2).’ However, we observe that the text does not refer to situations where the damage is covered by the civilly liable party. We also believe that, given the new legislative direction focusing on damage recovery rather than imposing excessively large penalties for economic crimes, the benefits of the law should apply even when the damage is covered by the civilly liable party.

Furthermore, it is noted that in cases where a person commits a tax evasion offense and informs the criminal prosecution authorities about other participants, subsequently facilitating the discovery of the truth and criminal prosecution of these participants, they benefit from a reduction of the sentence limits by half.

Accordingly, paragraph (5) states, ‘If the person who committed one of the offenses specified in Art. 6 ind. 1, Art. 8, or 9, informs the criminal prosecution or fiscal authorities about the committed offense, while it is ongoing or within at most one year from the end of the criminal activity, and before the criminal prosecution authorities have been notified about it, and later facilitates the discovery of the truth and the criminal prosecution of one or more participants in the commission of the offense, the special limits are reduced by half.

To benefit from the half-reduction of the sentence limits in this case, the person who committed a tax evasion offense must:

– Inform the criminal prosecution authorities about other participants;

– The notification must take place during the commission of the offense or at the latest within one year after its completion;

– The criminal prosecution authorities must not have been previously notified about these participants;

– Facilitate the discovery of the truth and the criminal prosecution of one or more participants in the commission of the offense;

– The offender must not have committed another offense specified by this law within a 5-year period from the commission of the act for which they benefited from Art. 10 para. (1) or (2).

Conclusions and legislative proposals:

To increase the collection rate of funds to the state budget and simultaneously prevent the insolvency of economic operators, we believe it is necessary to extend the payment term in the situation provided in paragraph (1) of Art. 10 from 30 days to at least 90 days;

Additionally, we believe the legislator has an obligation to clarify the situation in which the damage is covered by the civilly liable party, in which case we think all accused can benefit from the causes of non-punishment or, as applicable, reduction or substitution of the sentence.

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[1] See Decision No. 66 of September 29, 2021, regarding the interpretation of Art. 10 para. (1^1) of Law No. 241/2005 for the prevention and combating of tax evasion.

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Lawyer Vasile Băiculescu, Bucharest Bar Association
Member of the Disciplinary Committee of the Bucharest Bar Association
Managing Partner at BĂICULESCU & ASOCIAȚII Law Firm
PhD candidate at the Romanian Academy – Institute of Legal Research – Acad. Andrei Rădulescu.