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PROTECTION OF STATE FISCAL INTERESTS IN THE REPUBLIC OF LATVIA THROUGH CRIMINAL LAW

PROTECTION OF STATE FISCAL INTERESTS IN THE REPUBLIC OF LATVIA THROUGH CRIMINAL LAWPROTECTION OF STATE FISCAL INTERESTS IN THE REPUBLIC OF LATVIA THROUGH CRIMINAL LAW
Lyubov Koval, докторант

Латвийский Университет, Латвия

Участник конференции

The article analyses protection elements of state fiscal interests provided by the Criminal Law of the Republic of Latvia and describes characteristics of criminal offences endangering the state fiscal interests as provided by the Criminal Law. By conducting research and analysis of criminal offences against the national economic interests in the area of tax revenue as provided by the Criminal Law, recommendations are provided for solving the qualification problems of these criminal offences.

Keywords: State revenue, state fiscal interests, tax, tax evasion, criminal liability, tax crimes

 

Evasion of tax payments and payments equivalent thereto (hereinafter referred to also as tax evasion or non-payment of taxes) is a social phenomenon. Legislator protects the state fiscal interests by providing liability in regulatory enactments, including criminal liability, for non-compliance or improper performance of requirements of regulatory enactments on taxes and evasion of tax payments. In accordance with the statistical data for 2010 collected by the Information Centre of the Ministry of Interior 281 criminal offences described in Section 218 of the Criminal Law (hereinafter referred to also as CL) were discovered in Latvia; in 2012 were discovered 210 such criminal offences; in 2013 – 182 such criminal offences; in 2014 – 152 such criminal offences; in 2015 – 117 such criminal offences; in 2016 – 160 such criminal offences; and in first four months of 2017 were found 72 such criminal offences.[[1]] Analysis of the statistical data shows decrease of the registered criminal offences from 2010, but as rightly emphasised by Maizitis “in relation to criminal offences in economy such a concept as shadow economy should also be assessed, which actually is a latent crime”.[[2]]

Basis for application of criminal liability is commitment of a criminal offence; thus, it is the most severe and most serious type of legal liability. According to the opinion of Jakubanecs, criminal liability is “one of the types of legal liability, legal consequences for committing a crime manifested as application of state enforcement against the guilty party by the way of punishment”.[[3]] Krastins states that “criminal liability is enforced obligation applied to a natural person on behalf of the state to be liable for the committed criminal offence in accordance with the Criminal Law and to receive punishment in cases prescribed by the Law in terms of restrictions to personal liberty, separate rights or property.”[[4]] Scientific literature underlines that “criminal liability applies directly to the personality of the offender even if it applies to his economic interests”.[[5]] In accordance with Section 1, Paragraph one of the CL “only a person who is guilty of committing a criminal offence, that is, one who deliberately (intentionally) or through negligence has committed an offence which is set out in this Law and which has all the constituent elements of a criminal offence, may be held criminally liable and punished”. Thus, legislator has defined commitment of the criminal offence set out in the Criminal Law as the only basis for criminal liability, indicating that application of criminal liability by analogy of offences shall not be permitted. It should be noted that commitment of a criminal offence set out in the CL is the basis for criminal liability, but criminal liability is applied in cases set out in CL if the guilt of the person in committing a criminal offence has been proved and provided in accordance with the procedure prescribed by the Criminal Procedure Law[[6]].

As mentioned previously, criminal liability for evasion of tax payments and payments equivalent thereto has been provided in Section 218 of CL. It should be noted that CL provides liability also for violation of accounting and statistical information regulations (Section 217 of CL) and for avoidance of submitting the declaration (Section 219 of CL), since 7 April 2016 Criminal Law also provides liability for violation of work remuneration regulations (Section 2171 of CL)[[7]]. However, it should be acknowledged that by May 2017 only 6 criminal proceedings have been initiated for commitment of a criminal offence set out in Section 2171 of CL.[[8]] Notably that in separate cases state fiscal interests are protected by Section 177 of CL regarding fraud.

Application of CL provisions provides regulation for criminal relationships. An insight established by the doctrine of the criminal law states that by correctly qualifying a criminal offence it is possible to provide a fair regulation of criminal relationships. When criminal liability is applied to a person, it is essential to clarify if the actions of the person contain constituent elements of a criminal offence and which section and its paragraph of CL sets it out. In CL, each constitution of a criminal offence is specific because it includes the most essential, typical and necessary characteristics of a specific criminal offence.[[9]]

Krastins notes that “qualification of a criminal offence means establishment of full consistency between factual elements of an offence and constituent elements of a specific criminal offence set out in the provisions of the Criminal Law”.[[10]]

One of the problematic issues in ensuring the state fiscal interests is correct qualification of criminal offences the object of which are the state fiscal interests and separating evasion of tax payments from such criminal offences as violation of accounting and statistical information regulations (Section 217 of CL), violation of work remuneration regulations (Section 2171 of CL) and avoidance of tax declaration submission (Section 219 of CL), as well as fraud (Section 177 of CL) because in terms of constituent elements these offences are similar.

Second paragraph of Section 219 of CL sets out criminal liability for providing false information in a declaration of income, property or transactions, or other declaration of a financial nature specified in the law, if false information is indicated regarding property or other income on a large scale. Attention should be paid to the fact that Section 219, Paragraph two of CL contrary to Section 218, Paragraph two of CL speaks of income on a large scale and not losses on a large scale caused to the state or local government.

If the person has provided false information in the tax declaration on income on a large scale, but has paid the tax correctly, the actions of the person should be qualify only pursuant to the respective paragraph of Section 219 of CL. The same way in accordance with the Law on Prevention of Conflict of Interest in Activities of Public Officials[[11]] the state official is obliged to submit to SRS electronically the declarations of the state official according to the deadlines and procedures set out in the law. It should be noted that obligation to submit a declaration has been set out in the law and is mandatory, but when declaring the income and property status, the official is not always required to calculate and pay the tax. If the state official does not comply with this statutory obligation and does not declare the real estate, transaction, income or other property on a large scale, then criminal offence set out in Section 219 of CL can be established.

Pursuant to Section 1, Clause 14 of Law on Taxes and Duties as evasion of tax and duty payments can be recognised the following actions: deliberate provision of false information in tax declarations or failure to submit tax declarations, informative declarations or requested information necessary for the administration and control of taxes.[[12]]

Thus, when assessing the provisions of Section 1, Clause 14 of the Law on Taxes and Duties and Sections 218 and 219 of CL, it may be concluded that the criminal offence set out in Section 219 of CL overlaps with the criminal offence set out in Section 218 of CL because it includes both the actions set out in Section 219 of CL and harmful consequences not set out in Section 219 of CL. Therefore, provisions included in Section 218 of CL are more complete than those included in Section 219 of CL.

Inclusion of false information in declarations is one of the ways to evade the tax payments. It should be noted that if the persons evades from tax payments by providing false information in the tax declarations, their actions should be qualified only in accordance with the respective paragraph of Section 218 of CL according to qualification regulations regarding competition of legal provisions as recognised by the theory of the criminal law. If legal provisions of a broader and narrower content compete, the offence shall be qualified according to the broader provision because it contains links to other elements of an offence which are not included in the narrower provision.[[13]]

Practically every evasion of tax payments (with few exclusions) is linked to forgery of accounting documents, annual reports, statistical reports or statistical information. The support for this fact is established because concealment or decrease of any taxable object is linked to inclusion of false information in accounting documents or reports or falsification thereof. Inclusion of false information in accounting documents provides a basis for its further inclusion in tax declarations to be submitted to tax administration as reporting documents on calculated tax amounts. Conclusions can be drawn that inclusion of false information in tax declarations are inextricably linked to falsification of information to be included in accounting documents. As explained above, inclusion of false information in tax declarations is one of the ways of tax evasion. Thus, if the person evades the tax payments by falsifying the accounting documents or including false information in these documents, the actions of such a person shall be qualified only in accordance with the respective paragraph of Section 218 of CL by observing the regulation regarding solution of the competing analysed legal provisions. Provisions set out in Section 218 of CL are broader in content in comparison to the provision set out in Section 217 of CL; thus, tax evasion also is of a broader content and includes not only violation of accounting and statistical information regulations, but also causing harmful consequences to the state and local government budget, and thus should be incriminated.

To summarise, it can be concluded that provisions included in Section 218 of CL are of a broader content than those included in Section 217 of CL; thus, tax evasion which is linked to falsification of accounting documents or inclusion of false information therein should be qualified only according to the respective paragraph of Section 218 of CL. This insight has also been established by the settled case-law of the Supreme Court of the Republic of Latvia.[[14]] However, if the amount of taxes to be paid by the company, authority or organisation does not change due to concealment or falsification of statutory accounting documents, annual reports, statistical reports or statistical information or does not exceed the amount specified in Section 218 of CL, the offence should be qualified in accordance with Section 217 of CL.

When analysing the criminal offence set out by Section 2171, it may be concluded that in this constitution of criminal offence the legislator has actually separately provided one of the ways to evade personal income tax and mandatory state social insurance payments. This section provides criminal liability for disbursement of work remuneration not indicated in the accounting records, if it has been committed on a significant scale. Firstly, legislator has provided a lower threshold of criminal liability: significant scale and not large scale; secondly, object of this offence contrary to offence set out in Section 218 of CL is work remuneration not indicated in the accounting records, not the taxes which were not paid as a result. In real circumstances, there may be a situation when the real multiplicity of criminal offences set out in Section 218 of CL and Section 2171 of CL will be formed. If the taxpayer (company) not only disburses work remuneration not indicated in the accounting records, but also evades from paying personal income tax and/or mandatory state social insurance payments calculated from the amounts of work remuneration indicated in accounting, the offence shall be qualified pursuant to Section 218 of CL and Section 2171 of CL. It should be noted that multiplicity will be formed also in cases of disbursed work remuneration not indicated in accounting and at the same time evasion of other tax payments takes place. But if all taxes for employees and transactions indicated in accounting have been correctly calculated and paid, but at the same time disbursement of work remuneration not indicated in accounting takes place on significant scale, this offence shall be qualified only in accordance with Section 2171.

In the opinion of the author, the view expressed by Judins in judicial practice summary of Supreme Court of the Republic of Latvia regarding fraud that criminal offences set out in Sections 177 and 218 of CL do not create the ideal multiplicity of criminal offences.[[15]] At the same time the criminal offences mentioned in practice may create the real multiplicity of criminal offences when a person who falsifies documents and provides false information in reports not only evades from tax payments but misleads SRS or other institution that administers collection of duties or taxes and requests to repay in cash the allegedly overpaid taxes from the state budget. Similar opinion is expressed in the decision of the general meeting of judges of the Department of Criminal Cases and the Court Chamber of Criminal Cases of the Senate of the Supreme Court dated 22 May 2009 on judicial practice summary in criminal cases regarding fraud”.[[16]]

A certain clarity on solving issues regarding qualification of tax evasion is provided by the Decision of the Department of criminal Cases of the Senate of the Supreme Court dated 26 March 2013 on case No. SKK – 3/2013, wherein it is reasonably stated that “significant difference separating these two criminal offences is that when committing the criminal offence set out in Section 177 of the Criminal Law the guilty person acquires property of another person. But if the person commits criminal offence set out in Section 218 of the Criminal Law, the action or omission of the guilty person is aimed at non-payment of taxes, obtaining the right to decreased taxes, use of overpaid tax by covering tax amounts to be paid into the state budgets in future taxation periods or for payment of other overdue payments, i.e., in order not to give their property to another person.”[[17]]

The author believes that this insight should be supplemented with another significant difference, namely, the object of the criminal offence set out in Section 177 of CL is the economic interest of the victim. Tax evasion just like fraud applies to economic interests; however, tax evasion applies to economic interests in the area of tax revenue.

When assessing the legal tax framework, Senate of the Supreme Court rightly states that “value added tax should be applied to a person who performs economic activity. Thus, in cases when economic activity is not performed but only fictitious transactions are made, the state economic interests in tax area would not be harmed because tax from non-existent transaction is not possible; and thus in certain circumstances the actions of the person should be qualified pursuant to the respective paragraph of Section 177 of the Criminal Law.”[[18]]

Similar opinion was expressed by the Department of Criminal Cases of the Senate of the Supreme Court of the Republic of Latvia in its decision in case SK – 11/2013, indicating that if the company performs economic activity, evasion of value added tax payment is possible by excluding from the amount to be paid into the budget input tax for transactions that did not take place. But in cases when economic activity is not performed but input tax on the basis of transactions that did not take place has been received back as overpaid tax, for instance, the state interests in tax collection area are not endangered; however, there is a cause to assess if fraud has not taken place.”[[19]]

Thus, Criminal Law provides four constitutions of criminal offences in order to protect the state fiscal interests from violations of taxation regulatory enactments and one constitution of criminal offence that generally protects the property rights.

 

References:

  • 1. Unpublished statistical data regarding registered criminal offences from the Information System of the Information Centre of the Ministry of Interior of the Republic of Latvia (in Latvian).

  • 2. Maizitis J. Business, Criminal Offences in Economy and Simplified Processes // Effectiveness of Law in Post-modern Society: Collection of Articles of the 73rd Conference of the University of Latvia./ – Riga: University of Latvia Press, 2015. – p. 64 (in Latvian).

  • 3. Jakubanecs V. Explanatory Dictionary of Legal Terminology. Third Enhanced and Enlarged Edition. – Riga: P&K, 2001. – p. 18 (in Latvian).

  • 4. Krastins U., Liholaja V. Comments on the Criminal Law. Part One. – Riga: Courthouse Agency, 2015. – p. 37 (in Latvian).

  • 5. Theory of State and Law: Course of Lectures. Revised and enlarged second edition. M.I. Baitin, V.V. Borisov, F.A. Grigoryev et al. – Moscow: Lawyer, 2003. – p. 600 (in Russian).

  • 6.Criminal Procedure Law // Latvijas Vestnesis. – 2005. – No.74 (in Latvian).

  • 7. Amendments to the Criminal Law // Latvijas Vestnesis – 2016. – No. 59 (in Latvian).

  • 8. Unpublished statistical data regarding registered criminal offences from the Information System of the Information Centre of the Ministry of Interior of the Republic of Latvia (in Latvian).

  • 9. Liholaja V. Qualification of Criminal Offences: Law. Theory. Practice. Second Enlarged Edition. – Riga: Courthouse Agency, 2007. – p. 20 (in Latvian).

  • 10. Krastins U. Criminal Offence. – Riga: Courthouse Agency, 2000. – p. 26 (in Latvian).

  • 11. On Prevention of Conflict of Interest in Activities of Public Officials// Latvijas Vestnesis. – 2002. – No. 69 (in Latvian).

  • 12. On Taxes and Duties // Latvijas Vestnesis – 1995. – No. 26 (in Latvian).

  • 13. Krastins U., Liholaja V. Comments on the Criminal Law. Part One. – Riga: Courthouse Agency, 2015. – pp. 137-138 (in Latvian).

  • 14. Judicial Practice Summary. Judicial Practice in Cases regarding Money Laundering and Evasion of Tax Payments. [Electronic resources] – Online access: <http://at.gov.lv/files/uploads/files/Nodokkli%20legalizacija_anonim.doc> (in Latvian).

  • 15. Judicial Practice in Criminal Cases regarding Fraud. [Electronic resource] – Online access: <http://www.at.gov.lv/files/uploads/files/docs/summaries/2009/tp_krapsana.doc> (in Latvian).

  • 16. Decision of the general meeting of judges of the Department of Criminal Cases and the Court Chamber of Criminal Cases of the Senate of the Supreme Court dated 22 May 2009 on judicial practice summary in criminal cases regarding fraud ” // Jurista Vards. – 2009. – No.22 (in Latvian).

  • 17. Decision of the Department of Criminal Cases of the Senate of the Supreme Court of the Republic of Latvia dated 26 March 2013 in case No. SKK – 3/2013; criminal case No. 11250007609. [Electronic resource] – Online access: <http://at.gov.lv/files/uploads/files/archive/department2/2013/skk-3-13.doc> (in Latvian).

  • 18. ibid.

  • 19. Decision of the Department of Criminal Cases of the Senate of the Supreme Court of the Republic of Latvia dated 30 April 2013 in case No. SKK – 11/2013; criminal case No. 15830113805. [Electronic resource] – Online access: <http://at.gov.lv/files/uploads/files/archive/department2/2013/skk-11-13.doc> (in Latvian).

Комментарии: 8

Мельничук Виталий Викторович

Указанная работа представляет собой правоприменительную практику Верховного суда Латвийской республики и является актуальной для лиц, занимающихся юридической практикой. По ряду признаков, при сравнительном анализе решений Верховных судов Латвии и Украины в налоговых преступлениях, проявляется ряд конструктивных различий, по которым пошла правоприменительная практика этих государств. Мне есть, что почерпнуть именно с Вашей публикации для работы в международном праве. Именно Ваш труд, мне так кажется, заслуживает наивысшей оценки.

Коваль Любовь Николаевна

Благодарю Вас за детальный комментарий и столь высокую оценку моего исследования. С уважением, Коваль Л.Н.

Зульфугарзаде Теймур Эльдарович

Работа представляет собой весьма интересное и содержательное исследование уголовной политики Латвийской Республики в фискальной сфере. Материал изложен на весьма высоком уровне. Работа заслуживает весьма высокой положительной оценки.

Коваль Любовь Николаевна

Благодарю Вас за столь высокую оценку моего исследования. С уважением, Коваль Л.Н.

Тойво Таннинг

Dear Lyubov Koval! Very informative and elaborate a scientific paper. With a wish of creative successes and for best salutatory. Toivo Tanning

Коваль Любовь Николаевна

Thank you for your comment.

Королев Евгений Сергеевич

Очень содержательная и проработанная научная статья. Действительно, сейчас государственные финансовые интересы и их защита является актуальной не только для Латвии, но и для большинства государств. Благодарю автора за работу! С Уважением, Е.С. Королёв.

Коваль Любовь Николаевна

Благодарю Вас за Ваш комментарий. С уважением, Л.Н.Коваль.
Комментарии: 8

Мельничук Виталий Викторович

Указанная работа представляет собой правоприменительную практику Верховного суда Латвийской республики и является актуальной для лиц, занимающихся юридической практикой. По ряду признаков, при сравнительном анализе решений Верховных судов Латвии и Украины в налоговых преступлениях, проявляется ряд конструктивных различий, по которым пошла правоприменительная практика этих государств. Мне есть, что почерпнуть именно с Вашей публикации для работы в международном праве. Именно Ваш труд, мне так кажется, заслуживает наивысшей оценки.

Коваль Любовь Николаевна

Благодарю Вас за детальный комментарий и столь высокую оценку моего исследования. С уважением, Коваль Л.Н.

Зульфугарзаде Теймур Эльдарович

Работа представляет собой весьма интересное и содержательное исследование уголовной политики Латвийской Республики в фискальной сфере. Материал изложен на весьма высоком уровне. Работа заслуживает весьма высокой положительной оценки.

Коваль Любовь Николаевна

Благодарю Вас за столь высокую оценку моего исследования. С уважением, Коваль Л.Н.

Тойво Таннинг

Dear Lyubov Koval! Very informative and elaborate a scientific paper. With a wish of creative successes and for best salutatory. Toivo Tanning

Коваль Любовь Николаевна

Thank you for your comment.

Королев Евгений Сергеевич

Очень содержательная и проработанная научная статья. Действительно, сейчас государственные финансовые интересы и их защита является актуальной не только для Латвии, но и для большинства государств. Благодарю автора за работу! С Уважением, Е.С. Королёв.

Коваль Любовь Николаевна

Благодарю Вас за Ваш комментарий. С уважением, Л.Н.Коваль.
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