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A New Attempt by State Authorities Through Criminal Law Instruments To Cover the Budget Deficit and State’s Inability To Collect Taxes

Romania
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Starting with May 16, 2024, the Law no. 126/2024 on some measures to strengthen the capacity to combat tax evasion, as well as to amend and supplement some normative acts, enters into force.

The Law no. 126/2024 brings important changes in the criminalization of certain acts of tax evasion, in the regulation of cases that remove criminal liability for such acts under certain conditions, in terms of the sanctioning regime of such acts,  and regarding  the moment from which the statute of limitation of criminal liability for committing such acts runs.

Most likely, the implementation of the new provisions, which unanimously passed the filter of constitutional judges following the Decision of the Constitutional Court nr. Law no. 146 of 19 March 2024 will increase the power prerogatives of tax inspectors in assessing facts as tax evasion offenses and in assessing damages to the state budget, the lack of predictability of the content of new incriminations inevitably generating difficulties in their interpretation and application, with a direct impact on achieving the objective of these amendments, namely the rapid recovery of damages resulting from tax evasion acts.

In addition to the real difficulties in applying new offences, such as

  • submission of correct VAT declarations for fraudulently masking non-payment or establishment of undue rights to VAT refunds, which would constitute a genuine application of the notion of fraud to the law in the field of tax evasion carried out through legal transactions of VAT payments and refunds, in the view of the Constitutional Court (see paragraph 58 of the recitals of CCR Decision no. 146 of 19 March 2024), or
  • direct or indirect crediting of an individual for the purpose of making payments with amounts of money resulting from the failure to highlight in the accounting documents the commercial operations performed and/or the income earned of the taxpayer/taxpayers, which represents a special form of the offense (money laundering) incriminated by the provisions of art. 49 para. (1) letter a of Law nr. 129/2019 (I would see paragraph 65 of the recitals of CCR Decision no. 146 of 19 March 202

it remains to be seen how the taxpayer will defend himself against the formulation of a brief criminal charge following the tax control that found a damage due to the consolidated budget of up to EUR 1,000,000, given that in order to benefit from impunity he must pay in full the actual damage + 15% + interest and penalties within a maximum of 30 days from the completion of the control,  excluding the possibility of a rescheduling expressly provided for by the Fiscal Procedure Code, respectively who will order a closure/termination solution as long as the criminal investigation bodies are no longer notified.

As an aspect of absolute novelty in relation to criminal law institutions, it should be noted the moment from which the statute of limitation of criminal liability for committing tax evasion offenses runs, respectively the date of notification to the tax body or the date of notification to the criminal investigation body, but not later than 10 years from the date of committing the crime, given that until the entry into force of the new regulation the beginning of the limitation period for criminal liability was linked to the conduct of the perpetrator and when he decides to stop the criminal activity.

Last but not least, the way of regulating some cases of impunity – for example, the payment of damages not exceeding EUR 1,000.000, in the equivalent of national currency, + 50%  + the interest and penalties during the preliminary chamber procedure, will raise difficulties of application in procedural matters for the preliminary chamber judge, who will not be able to order a solution to close the criminal proceedings as long as, at this stage of the proceedings, he exercises only the function of verifying the legality of the indictment or non-indictment, the only one who could order such a solution being the judge who solve the merits of the case.

By Alexandru Arjoca, Counsel, and Head of White Collar Crime, DLA Piper

Romanian Knowledge Partner

Țuca Zbârcea & Asociații is a full-service independent law firm, employing cross-disciplinary teams of lawyers, insolvency practitioners, tax consultants, IP counsellors, economists and staff members. It also operates a secondary law office in Cluj-Napoca (Romania), and has a ‘best-friend’ agreement with a leading law firm in the Republic of Moldova. In addition, thanks to the firm’s dedicated Foreign Desks, the team provides the full range of services to international investors seeking to gain a foothold or expand their existing operations in Romania. Since 2019, the firm and its tax arm are collaborating with Andersen Global in Romania.

Țuca Zbârcea & Asociaţii is providing legal services in every aspect of business, covering all major areas of practice: corporate and M&A; litigation and international arbitration; corporate tax; public procurement; TMT; employment; insurance; banking and finance; capital markets; competition; healthcare and pharmaceutical; energy and natural resources; environmental; intellectual property; real estate; regulatory legal services.

Țuca Zbârcea & Asociaţii is a First-Tier law firm in all international legal directories and a multiple award-winning law firm both locally and internationally. It received the CEE Deal of the Year Award (DOTY Awards 2021) and the Law Firm of the Year Award: Romania (IFLR Europe Awards 2021). 

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