The taxman versus the right to property
Tax fines and tax increases are imposed or implemented in a variety of situations, and often the amounts run to significant heights simply because you failed to meet a particular tax law obligation and regardless of whether you effectively had the goal of evading taxes.
That the tax authority has the power to proceed with a tax increase or to impose such a tax penalty is certain. But whether such a decision is always consistent with the right to property remains to be seen.
The same question also arises when taxes are deliberately evaded, fraudulently, and enormous sums are forfeited, which in turn accrue to the Belgian State - the tax authorities.
The relationship between the right to property on the one hand and tax fines and forfeitures on the other is the subject of this contribution.
Right to property and tax fines
Article 1 of the First Additional Protocol to the European Convention on Human Rights states the following:
"Every natural or legal person is entitled to the undisturbed enjoyment of his property. No one shall be deprived of his property except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to regulate the use of property in accordance with the general interest or to secure the payment of taxes or other charges or penalties."
In addition, the European Court of Human Rights stated in its judgment of January 11, 2007, in the case of Mamidakis t. Greece, that tax fines can overtly violate the right to property.
It follows from this ruling that member states of the Council of Europe do indeed have the power to regulate the use of property - through tax obligations and fines, for example - but they must do so in a proportionate manner and without fundamentally affecting a person's financial situation.
In other words, European member states have some room for maneuver but a fine that is ten times the tax debt, as was the case in the Mamidakis case, is disproportionate in any case.
In Belgium, tax fines max out at EUR 1,250, so they are unlikely to constitute a disproportionate infringement of the right to property, although of course everything depends on the initial tax liability.
Tax increases, on the other hand, can have a heavier financial impact, since the tax on undeclared income can be increased by 200% (except for some caps) and that increase comes on top of the tax in question.
Of course, a 200% increase is still not a tenfold increase in tax but can certainly count and lead to a discussion of proportionality.
At a minimum, it should be evaluated whether or not such an increase fundamentally affects a person's financial situation.
Right to property and forfeitures
In addition, the European Court of Human Rights, inter alia in its judgment of October 8, 2019 in the case of Balsamo t. San Marino, held that the right to property applies equally when forfeitures are pronounced, in the context of a criminal conviction for tax crimes or money laundering, for example.
At the same time, the Court does argue that Council of Europe member states should have broad powers to extract illegal sums of money from the economy.
However, a principle that continues to apply in any case, even when a forfeiture is pronounced, is the principle of proportionality.
The Belgian Criminal Code therefore correctly provides that when the criminal judge has the possibility (and therefore not the obligation) to pronounce a forfeiture, that same judge will reduce the amount "so as not to impose an unreasonably severe sentence on the convicted person".
Moreover, it can be noted that, since Jan. 1, 2020, the criminal court is required to take into account tax fines and tax increases, and that the same court may not impose a forfeiture when the taxes or duties have been paid in full; precisely for the sake of the fact that a person may not be convicted twice for the same offense.
Questions about tax penalties, tax increases? Come into contact with tax authorities?
Please feel free to contact us at info@bannister.be or 03/369.28.00.
December 28, 2020
