Tax penalties are sometimes considered criminal sanctions
Authors: JUDr. Lukáš Duffek, Mgr. Martin Dolnák
The Czech Financial Administration does not distinguish between deliberate and negligent misconduct in the assessment of taxes when conducting inspections, and in cases of re-assessment of taxes, as part of a tax inspection, together with the re-assessed tax and late charges ex officio imposes a tax penalty on the inspected taxable person amounting to 20% of the value of the re-assessed tax. First the Supreme Administrative Court, and subsequently the Criminal Division of the Supreme Court with the European Court of Human Rights in Strasbourg, found that tax penalties under certain circumstances have the characteristics of criminal sanctions, to which the principles of criminal law apply, more specifically – the principle of ne bis in idem (akin to double jeopardy). However, this principle does not apply in absolutely all cases of tax penalties, so each case needs to be assessed individually. In this respect, the Criminal Division of the Supreme Court has defined the conditions under which the ne bis in idem principle is not breached and criminal sanctions as well as penalties may be imposed. The ne bis in idem principle is not breached if both proceedings together constitute a complete and integrated whole, and the concurrent sanctioning is proportionate and calculable; in other words, the two proceedings together form a coherent whole.
From a professional point of view, the legal structure of the tax penalty, as regulated in the Tax Code, is at the very least problematic, since it penalizes both the deliberate non-payment/evasion of taxes and the negligent conduct of taxable persons caused by faulty tax reports, which is often caused by the lack of clarity in the taxation system. This is one of the reasons why the system of tax penalties is often subject to criticism from experts, who draw attention to its inconsistency and propose its complete annulment.
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