The publication of Law no 241/2005 led to achievement of the mostly desired systematization of the deeds that represens offences of tax dodging, the new law proving to be more compelling related to the definition and the approach of the offence than the previous legal frame. This article tackles the concept of tax dodging from the perspective of being one of the most frequent offence as presented by art. 9 paragaraph. 1 let.a from Law no 241/2005

Adrian Aldea

SERIES VII - SOCIAL SCIENCES AND LAW

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Bulletin of the Transilvania University of Braşov • Vol. 2 (51) - 2009  Series VII: Social Sciences and Law  TAX DODGING. THE OFFENCE STIPULATED BY ARTICLE 9 PARAGRAPH.1 LET. A FROM  LAW 24/2005. CONSIDERATIONS.  Adrian ALDEA 1  Abstract: The publication of Law no 241/2005 led to achievement of the mostly desired  systematization of the deeds that represens offences of tax dodging, the new law proving to be more compelling related to the definition and the approach of the offence than the previous legal frame. This article tackles the concept of tax dodging from the perspective of being one of the most frequent offence as presented by art. 9 paragaraph. 1 let.a  from Law no 241/2005.  Key words: offence, tax dodging, elude, taxable income.                                                    1 Dept. of Public Law, Transilvania University of Brasov. 1. Introduction Within the law no. 241/2005 the concept of tax dodging is no longer legally defined unlike  the  previous  one  which  stipulated this domain. Description of the concept is comprised  within  Chapter  II  from  Law 241/2005,  articles  3-9,  its  legal  content being pointed out among article 9.   Within the law no 87/1994 republished, the concept of tax dodging was defined as eluding, by any means, from declaration or payment of taxes, duties, contributions or other  amount  owed  to  the  state  budget, local  budgets,  social  securities’  budgets and  special  funds’  budgets  by  the Romanian  or  foreign  individuals  or companies,  all  called  tax  payers.  In contrast with the old stipulations, the new statements  gave  up  the  explanatory  note „completely or partially”. Therefore, the tax dodging consists of an illicit activity through which the tax payer eludes  the  obligation  to  pay  to  the  state some  taxes,  duties,  contributions  that  he legally  owes  because  his  permanent  or temporary  activities  generate  taxable incomes.  The  activity  may  appear  as  an action  or  as  a  lack  of  action,  still maintaining  the  specific  illicit  character and the specific effects (the trial and even the success to harm the state budget). As  a  consequence  of  the  modifications brought by the law 161/2003 the concept of tax dodging additionally comprised, in comparison with the old law, the activities of  eluding  from  taxes  declaration  in  the stage  when  they  do  not  become  exigible yet.  The  new  stipulations  from  law 161/2003  show  the  compliance  between the  definition  of  tax  dodging  and  the offences of tax dodging regarding both the activities  of  „eluding  from  taxes’ declaration”  and  of  „eluding  from  taxes’ payment”. In these circumstances the tax dodging is considered to be an offence of menace or an offence of effect, by case.  These legal definitions no longer belong to the content of law 241/2005, but they Bulletin of the Transilvania University of Braşov • Vol. 2 (51) - 2009 • Series VII  164 can be determined based on the analysis of the offences presented within this law and of their immediate effects.  2. Tax dodging Types In relation to the means of execution and if there are infringed certain norms through the method of fiscal obligations’ avoidance two  types  of  tax  dodging  can  be emphasized: legal or tolerated tax dodging and illicit or fraudulent tax dodging. 2.1. Legal Tax Dodging The doctrine’s opinion is shared between its experts regarding the notion of legal tax dodging. Some authors[1] consider this type of tax dodging as being the action of the tax payer through which he avoids the law applying  an  unforeseen  combination  of legal  stipulations,  therefore  being „tolerated by losing sight”. Other authors[2] mention  that  through  this  type  of  tax dodging  the elusion of some parts of the taxable  source  is  allowed  without considering this conduct to bring harm to any law and to be penalized as an offence or as a contravention. In my opinion, in this case it only can be considered  the  existence  of  some inadvertencies or gaps of the law and this type of tax dodging has a high probability of  occurrence  when  new  forms  of enterprises or new categories of taxes are established  (major  changes  in  legislation without  correlation  with  internal  existing law,  in  fact  a  serious  mistake  of  legal conception). After  all,  the  tax  payers  find  some deficiencies  of  the  law,  use  them  and legally elude the payment which they were obliged to made because of the legislative shortages. Acting in such a manner, the tax payers  remain  within  the  strict  limit  of their rights. The state can only defend itself through  o  well  structured,  clear,  precise, scientific  legislation.  On  these  terms,  the one who carries the guilt for this negative phenomenon is only the state. In conclusion, even if the state will suffer any prejudice, the means which led to this situation does not entail any penalty from the specific authorities.  Some authors[3] even offer examples of legal  tax  dodging  based  on  legislation’s insufficiency or favorable interpretation of the law: -  usage  within  certain  limits  of  legal stipulations  regarding  philanthropic donations, no matter if they took place or did not; -  deduction  from  taxable  income  of protocol and advertising  expenses with a higher level that the one that results from applying legal rates; -  favorable  interpretation  of  legal stipulation regarding important facilities for  contribution  to  support  social activities; -  making  up  depreciation  or  reserves’ funds  in  a  higher  ratio  than  the  ones justified  from  the  economic  point  of view, in this way decreasing the taxable income. 2.2. Illicit Tax Dodging This type of tax dodging consists of all the tax payers’ actions which break a legal stipulation with the purpose of not paying the  related  taxes.  This  is  based  on  fraud and dishonesty of the tax payer. Illicit  tax  dodging  is  incriminated  and punished  by  the  law  through contraventions  and  offences.  This  is  the role  of  the  law  241/2005  regarding prevention  and  control  of  tax  dodging which,  in  comparison  with  the  old  law 87/1994, republished and modified by the law 16/2003, does not mention dangerous deeds  socially  punished  through contravention, but only through offences.  3.  Offence  Stipulated  by  Article  9 Paragraph.1 letter a A. Legal Content: The offence consists in „concealing the taxable good or source” with the object of Aldea, A.: Tax Dodging. The Offence Stipulated by Article 9 Paragraph.1 Let. A …  165 eluding  from  fulfillment  of  fiscal obligations as presented in paragraph.1 of article 9 from Law 241/2005. B. Constitutive Elements: I. The special legal object and also the passive subject are common with the ones of  other  offences  and  refer  to  social relations  regarding  the  development  of economic  and  financial  activities  whose achievement assumes honest fulfillment of fiscal  obligations  by  the  tax  payers,  the passive  subject  being  represented  by  the state or administrative units. II.  Material  object.  Some  authors[4] consider  that  the  material  object  of  this offence has a high degree of complexity: on  one  hand,  mainly,  the  taxation statement  counterfeited  by  the  tax  payer and on the other hand, subordinately, the amount  of  money  obtained  by  the  tax payer. The  material  object  of  the  offence  is made up of the taxable incomes, object or source.   III.  Active  subject.  Active  subject  is qualified, he/she being a tax payer liable to fiscal obligation. In absence of this quality the deed does not represent an offence. The attribute of tax payer is conditioned by the existence  of  a  fiscal  juridical  report enforced by the law.  IV.  Objective  side:  The  material element of this offence lies in eluding the fulfillment  of  fiscal  obligations  through concealment  of  the  taxable  object  or source.   Concealment  of  the  taxable  object  or source  means  the  action  of  taking  away from the fiscal authorities’ sight either the object  that  generates  payment  of  some amounts to the state budget (for example when passing over the state frontier some goods  for  which  custom  duties  must  be paid are hidden in the boot of the vehicle) or  the  entity  which  represents  the computation  ground  for  taxes  or  duties (carrying out services like taxicab services, seasonal  work,  consultancy,  real  estate securities, inheritance right).  In the experts’ references[5], the deed of an  usurer  that  declares  in  front  of  the notary,  while  authenticating  a  loan contract,  that  he  grants  the  loan  without charging interest, a statement which proves to  be  unreal  afterwards,  performs  the method  of  concealing  the  taxable  source (interest). Similarly[6],  it  can  be  considered  the deed  of  the  person  that  declares  a  lower price  than  the  real  one,  while authenticating  a loan contract in front of the notary. Another example can be mentioned: the administrator  of  a  private  enterprise  who did  not  register    significant  amounts  of money obtained from selling goods  which results  in  eluding  from  profit  tax payment.[7] The  administrator  who  frequently  and according  to  the  same  resolution  resold important  quantities  of  merchandise  to another private company at  a lower price than  the  acquisition  price  or  disguised manual  labor,  based  on  an  agreement contract,  committed  a  fiscal  offence  by recording  the  price  difference  on  costs’ side  (without  real  ground)  that  leads  to purloining from the payment of profit tax and value added tax (VAT). [8] Also the culprit deed that, as a tax payer, had  the  obligation  to  declare  to  the Financial Authority the incomes achieved from renting his office building to another company (monthly rent is cash-in), but he avoided the payment of fiscal obligation, was  qualified  as  an  offence  by  the Supreme Court.[9] Immediate  consequence  is  represented by giving rise to a menacing frame of mind regarding  incomplete  collection,  from  all tax  payers  who  own  taxable  goods  or sources, of the amounts owed to the state budget as taxes or duties. In this respect, the  above-mentioned  offence  is  a  formal Bulletin of the Transilvania University of Braşov • Vol. 2 (51) - 2009 • Series VII  166 one because the law does not demand that the  aim  should  be  achieved  by  the  tax payer, but  be pursued by him.   Causality report, that must be determined between  the  deed  and  its  effect,  is presumed  by  the  law  without  being necessary to establish it and to prove it by the judicial authorities. V.  Subjective  side:  The  offence  is committed  exclusively  with  direct intention,  meaning  that  intention  is qualified by the purpose. The person who commits  the  deed  knows  that  he/she achieves taxable incomes or owns taxable goods,  but  does  not  declare  them  to competent authorities with the determined end in view to elude from fiscal obligation fulfillment.   C. Forms. Methods. Sanctions. I. Forms. The offence can be considered to  be  committed  when the  time  limit  for any  taxable  income’s  declaration  expired as  stipulated  within  the  Fiscal  Code  or within the law that states the tax or duty and  followed  by  no  declaration  from  the tax payer regarding the taxable source or good,  through  concealing  them.  If  this concealment  lasts,  after  the  offence  was committed  there  will  be  a  continuous offence,  whose  ending  will  take  place  at the  moment  of  legal  and  complete declaration of the deed. II. Methods: The offence presents one single  normative  method  consisting  in concealment of the taxable good or source with  the  object  stipulated  by  the  law. Various factual methods comply with this normative method; for example, when the possession  of  the  good  is  subject  to taxation  on  customs,  when  vehicle possession is implied, etc.    III. Sanctions: The penalty stipulated by the law for  this offence  described  within paragraph 1 of article 9 from the law, is represented by the imprisonment from 2 to 8 years and forbiddance of some rights.  References  1.  Clocotici  D.,  Gheorghiu  Gh.:  Tax Dodging.  Editura  Lumina  Lex, Bucharest, 1997. 2.  Văcărel I., Anghelescu G.; Bistriceanu Gh.  D.;  Mosteanu  T.,  Bercea  F., Bodnar  M.,  Georgescu  F.:  Public finances.  Editura  Didactică  şi Pedagogică, Bucharest. 2000, p. 475. 3.  Şaguna  D.  D.,  Tutungiu  M.  E.:  Tax dodging.  Editura  Oscar  Print, Bucharest. 1995, p.25.  4.  Dumitru I.: Law  no. 1/2002. Offences stipulated by art. 12 and 13 from Law no. 87/1994. Differences. pp. 195-198.  5.  Olaru I.: Juridical qualification of the deed  regarding  the  statement  of  a lower price than the real one in front of the notary. Law no. 6/1999, p. 56. 6.  Olaru I.: Juridical qualification of the deed  regarding  the  statement  of  a lower price than the real one in front of the notary. Law no. 6/1999, p. 56 7.  Bucharest  Court  of  Appeal,  Penal Section  II,  Dec.  Pen.  No.  227  from 25.02.1999  quoted  by  DAN  SAFTA and Co., p. 75 8.  Prosecutor  charge  no.  11/1197  from 25.05.1998  issued  by  Prosecutor Office from Suceava Court of Appeal, unpublished.  9.  Supreme  Court  of  Justice.  Penal Section. Decision 2786 from 11 June 2003, www.csj.ro.  

Tax Dodging. The Offence Stipulated by Article 9 Paragraph.1 Let. A from Law 24/2005. Considerations

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