As the US economy continues to be the largest in the world and – despite the recent troubles – continues to remain the most valuable in terms of competitiveness, the US Dollar is likely to continue to keep its world reserve currency status.In this kind of respect, there are a lot of discussions (most of them contradictory) taking place.trade deficit, monetary policy, financial crisis

Cristi SPULBAR

Cristian STANCIU

Sabin RIZESCU

English

Research Papers in Economics

Year VIII, No. 10/2009                                                                                               173 
 
COMBATING TAX EVASION:  
BETWEEN GOALS AND ACHIEVEMENTS 
 
Lect. Alia Gabriela DUŢĂ, PhD 
University of Craiova 
 
1. General considerations 
 
The first concerns in the fight 
against tax evasion dates from 1877, 
when, by tracking the achievement of 
revenue law of the state government, 
counties and municipalities, 
administrations and public 
establishments and charity provided the 
"start of tracing the taxpayer who does 
not meet his duty until the 15th day of the 
second month of each quarter". However, 
the first vigorous attempts to control the 
phenomenon we find it in the draft tax 
reform proposed in 1921 by Nicolae 
Titulescu. Not agreed by taxpayers the 
“Titulescu Law” was repealed in 1923 
was promulgated the “Law of direct 
contributions" which was dropped at 
minimal imposition and severe sanctions 
against inflationary practices. As a result, 
the IRS has remained almost 
defenseless against the anti-tax spirit 
manifested by some taxpayers and lack 
of training of law enforcement bodies. 
One of the effects of law 
enforcement of direct contributions was 
the alarmingly low tax efficiency. 
Consequently, the special legislation had 
become an imperative repressive 
measure of tax evasion and a radical 
shift in methods of assessment for those 
classes of taxpayers who could easily 
evade tax. Against this background was 
born the first law that deals exclusively 
with tax evasion in Romania in 1929, as 
the "Law for tax evasion crackdown on 
direct contributions”. In our view, its limits 
arise from the fact that it gives an explicit 
definition of the concept of tax evasion. In 
its content they are referred to some 
issues that concern the delays in filing 
tax return statements, reducing reported 
income, double records, false balances, 
i.e. irregularities with administrative or 
criminal fraud without question in terms 
of tax evasion. 
A milestone on the tortuous road of 
combating tax evasion is the emergence 
of "Direct contribution Law" adopted in 
1933. Considered by some authors as "a 
code of evasion”, the law classifies 
deviations in “simple negligence" and 
"qualifying offenses", which were 
sanctioned with fines ranging from four 
times the tax avoided. For corruption 
against fiscal agents correctional prison 
was scheduled from 6 to 12 months, just 
for tax agents who knowingly did not set 
correctly state rights. 
A final test before the 
establishment of the command economy, 
designed to punish tax evasion, a new 
law was promulgated, Law no. 344 of 
December 29
th, 1947. Acts of tax 
evasion, according to this law, were 
treated as crime of sabotage and 
sanctioned with the penalties provided in 
the law for the suppression of speculation 
and sabotage. 
And in the command economy in 
the context of the continuing the 
phenomenon its attempts to keep within 
acceptable limits continued. Thus, by 
Law no. 18/24.06.1968 on the control of 
property of individuals that have been 
acquired illicitly were watched those with 
high and unjustified incomes. According 
to experts it is actually a simplified and 
adapted version to the conditions of the 
time of future laws to combat tax evasion 
after 1989. 174                                                                        Finance – Challenges of the Future 
2. New developments in legislation in 
the context of coagulation of market 
economy 
 
Phenomenon just as old as the 
existence of state, tax evasion has no 
boundaries of time and space. However, 
the extent and magnitude of this 
phenomenon sensitively differs from 
country to country, from time to time. In 
the former command economy countries 
with higher propensity of taxpayers to tax 
evasion and tolerant attitude of the 
authorities are accountable to a certain 
extent, through the feeling of rejection of 
everything that is dependent on state and 
law, after the years in which these two 
categories formed into instruments of 
oppression. Maybe so, some experts 
consider it a manifestation of gross forms 
of democracy, able to generate positive 
effects for the smooth operation of 
modern economies. For example, 
Nicolae Hoanţă maintains that "following 
tax evasion could have benefited the 
economy as a whole, if the efficiency with 
which resources are used from evasion is 
greater than that which would be 
obtained by the government for such 
funds”
1. 
Even if due consideration is given 
to the concept mentioned, we cannot 
overlook the adverse consequences, on 
the long-term, of the manifestation of tax 
evasion at micro and macroeconomic 
level. If on the short-term the fraudsters 
benefit and the state loses, on the long 
term also the other taxpayers are losing 
who have not resorted to tax evasion by 
a possible increase in their tax burdens, 
which may cause them to resort to tax 
evasion. In our opinion, the acceptance 
and particularly the widespread of this 
phenomenon would be similar to the 
acceptance of suppression, of the state 
itself. Yet life has shown that this is not 
possible in modern times, given the fact 
that "never and nowhere in the world, the 
                                                 
                                                
1 Nicolae Hoanţă, Economics and Public Finance, 
Polirom Publishing House, Iasi, 2000, p.281 
private initiative was unable to provide, 
by itself, social and economic balance of 
a nation"
2. In conclusion, the natural 
attitude towards the escapist 
phenomenon is to achieve a proper 
administration of it. 
Only in the context mentioned and 
given the alarming increase of cases of 
theft of a growing number of taxpayers to 
pay taxes due the public budget, 
developments in the law on combating 
tax evasion can be assessed, on the 
extent of coagulation of market economy. 
In our opinion, can be defined, more 
significantly three intervals in its course. 
The first period, covering the 
years 1990-1994, can be characterized 
as one of "legal vacuum". The only 
statutory regulation is represented by GO 
no. 17/20.08.1993 on laying down and 
punish contraventions of the financial and 
fiscal regulations, situation which was not 
able to provide gradual sanction, in 
accordance with the seriousness of the 
infringements of the law in this area. The 
legislative framework of GO no. 
17/20.08.1993, as the basic rule for acts 
of tax evasion, have been completed, to 
some extent, by other ordinances and 
laws, which came off with details, details 
about some underground activities 
identified or brought in thereafter in the 
concerns skilled institutions, such as: the 
Accounting Law no. 82/24.12.1991, Law 
no. 78/08.05.2000 for prevention, 
detection and punishment of corruption 
Law no. 656/07.12.2002 for the 
prevention and sanction of money 
laundering, GO no. 92/24.12.2003 
regarding the Fiscal Procedure Code, 
Law no. 161/19.04.2003 on measures to 
ensure transparency in the exercise of 
public dignities, public functions and in 
business, prevention and punishment of 
corruption, GO no. 75/30.08.2001 
regarding the organization and operation 
of the tax record. 
 
2 Nicolae Craiu, Underground economy between 
yes and no, Economic Publishing House, 
Bucharest, 2004, p.223 Year VIII, No. 10/2009                                                                                               175 
However, once initiated in terms of 
environment, the escapist phenomenon 
experienced an unexpected escalation. 
Tax burden and other factors, including 
mention economic and political instability, 
caused its inflammation and escape of 
control. Considering the fact that the law 
is totally utopian in the abolition of 
avoiding the payment of taxes, 
considering that some experts have 
recognized a "natural rate of tax 
evasion”, measures were taken to stop 
the phenomenon, resulting in the 
promulgation of Law No. 87/18.11.1994. 
In our opinion, this act marks the 
demarcation of the second period 
which extends until 2005. 
By occurrence of Law no. 
87/18.11.1994 the legal framework to 
combat tax evasion has been improved. 
The strength of the new law consists in 
the fact that it seeks a definition, closer to 
reality, of the concept of tax evasion as 
stealing by any means the imposition or 
payment of taxes, contributions and other 
sums due to State budget, local budgets, 
state social insurance budget and special 
funds by Romanian or foreign individuals 
and legal entities. 
We cannot underestimate the 
weaknesses, limits of this law. Neither in 
its republished form in the Official 
Gazette no. 545/29.07.2003, the law 
does not distinguish between fraud and 
tax evasion, putting equate between the 
two concepts, with major implications for 
understanding the causes that generate 
the two forms of circumventing the 
payment of taxes and especially the 
measures to be taken to combat it. Within 
the text of the law is used the concept of 
tax evasion within the meaning of tax 
fraud, i.e. that form of tax evasion which 
is to circumvent tax laws and is 
sanctioned by law. 
Depending on their severity the 
actions sanctioned by law have been 
included in two categories namely: 
  offenses punishable by 
imprisonment and the banning of rights; 
 misdemeanors punishable by 
fines. 
The gaps arising from the 
application of Law no. 87/1994 generated 
increased searches for their elimination, 
embodied in the emergence of a new 
legislation, namely the entry into force of 
Law no. 241/15.07.2005. In fact, its 
enactment may be considered as the 
time of genesis of the third period of the 
evolution of law on combating tax 
evasion. 
Among the strengths of the new 
law, which not only gives the necessary 
flexibility, but also the effectiveness 
expected, we mention: 
 rigorous definition of the concepts 
of fraud and tax evasion. The new law 
only stipulates specific penalties for tax 
fraud, irregularities of the nature of 
contraventions being established and 
sanctioned by the tax code and tax 
procedure code; 
  elements considered in its 
crystallization process: the intentional 
character of acts, meaning that 
subjectively, all acts of evading tax 
obligations are committed intentionally, 
fiscal authorities have the obligation to 
prove the intent to defraud the taxpayer, 
the probity of committing more crimes in 
the contest established by Law no. 
241/2005, as well as other offenses 
related to fraudulent tax evasion, such as 
false and / or use of false, fraudulent 
bankruptcy, money laundering, organized 
crime, etc., bad faith, as the legislative 
act punishes those facts committed by 
unfairness and dishonesty by the 
taxpayer, the social danger generated by 
forms of theft (acts of evading tax 
obligations, which are withheld at source 
by the taxpayers and not transferred to 
the general consolidated budget, have a 
greater social danger than other acts of 
tax evasion committed by taxpayers who 
are at the same time fund and tax 
supporters and payers), just punishment, 
which means there is close correlation 
between the severity of the offense and 
the penalty applied to the taxpayer; 176                                                                        Finance – Challenges of the Future 
 the emergence of the new law 
results as a phenomenon of continuity in 
the evolution of tax law. From the 
assessment of offenses specified in Law. 
241/2005 can be drawn the conclusion 
that some of them are covered for the 
first time, while others were taken from 
Law no. 87/1994 and reformulated. 
Among the offenses covered first, we 
mention: non-remaking, willfully of 
destroyed accounting records, the dates 
recorded for control documents; 
preventing, in any form, the competent 
bodies to enter, under the law, the 
offices, premises, land, with the purpose 
of financial controls, tax or customs; 
retention and non-payment, intentionally, 
within 30 days of maturity, the amounts 
of taxes or withholding contributions; 
replacement, degradation and alienation 
by the debtor or third persons of seized 
property, according to the provisions of 
the Fiscal Procedure Code and the Code 
of Criminal Procedure; 
  imposition of more stringent 
measures to punish the acts of tax 
evasion. The new normative acts of tax 
fraud are similar in that the sentences 
imposed on fraudsters, especially for 
facts based on major losses are as great 
as in the case of offenses against life and 
personal integrity; 
 statuary  of  exemptions  from 
criminal liability in the sense of non-
punishment of crimes committed or 
reducing sentences under certain 
circumstances, if the prosecution or trial 
until the first term, the accused or 
defendant to the acts of tax evasion 
covers all damage caused. 
Highlighting the strengths of Law 
no. 241/2005 we believe that a real 
interest presents, given that any 
legislation is perfect, the revealing of 
gaps arising in its design and 
implementation. The most significant 
seem to be: 
  confusion created even by its 
title: although in the title is included the 
notion of tax evasion, in reality it is tax 
fraud; 
  failure in defining the concept of 
tax fraud, an act which would have 
established unequivocally the powers of 
specialized compartments of local 
government authorities in terms of 
prevention and combating the escapist 
phenomenon; 
  non-punishment as infringements 
such acts as escape to pay tax 
obligations by taxpayers, through the 
transfer of shares or non-retain and non-
payment, by law, in legal terms, of taxes, 
fees and contributions which are made 
by stop at the source, although they were 
punished as crimes under Law no. 
87/1994. 
By putting in the spotlight these 
weaknesses of the Law no. 241/2005 
and considering them to their just size, 
we believe that they are not able to 
diminish the importance step forwarded 
in the process, often difficult, aimed at 
modernizing the tax laws in general, the 
combat against tax evasion in particular. 
By integrating this legislation in the 
package of legislative measures that 
have the purpose of harmonization of tax 
legislation with the European Union, we 
consider it possible to create premises 
for the limitation of the escapist 
phenomenon and the negative effects it 
generates. 
 
3. Conclusions 
 
Undoubtedly, tax evasion is one of 
the nuisances of the utmost importance 
that all states face more or less. Life has 
shown that what can be done effectively 
in this area is to limit the maximum 
possible of this phenomenon, its 
eradication being virtually impossible. 
The literature of specialty, both 
legal and economic, has multiple 
interpretations of the concept of tax 
evasion. As we state in the early lines of 
our approach, the phenomenon is one of 
vague and permeable outlines. Therefore 
we believe it is important to investigate its 
genesis, which is the cause that triggers 
it, how it evolves, what are the Year VIII, No. 10/2009                                                                                               177 
instruments and measures that allow the 
development of its decrease. Naturally, 
we cannot deny the significance of 
searches aimed at defining it. We believe 
that only this can create tools for keeping 
it under control. 
 
 
 
 
 
 
REFERENCES 
 
Nicolae Craiu  Underground Economy between Yes and No, Economic Publishing 
House, Bucharest, 2004, p.223; 
Nicolae Hoanţă  Economy and public finances, Polirom Publishing House, Iaşi, 2000, 
p.281; 
*****  Law no. 87/18.11.1994, republished in the Official Gazette  no. 
545/29.07.2003; 
*****  Law no. 241/15.07.2005, published in the Official Gazette no. 672 
from 27/07/2005. 
 

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