DECRIMINALISATION OF TAX LAW BY ADMINISTRATE PENALTIES OF TAX DUTIES 1. THE SCOPE OF PENALTY AND CRIMINAL PENALTY : A PRELIMINARY

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1 DECRIMINALISATION OF TAX LAW BY ADMINISTRATE PENALTIES OF TAX DUTIES Table of contents: 1. THE SCOPE OF PENALTIES AND CRIMINAL PENALTIES : A PRELIMINARY OVERVIEW UNDER THE EUROPEAN PRINCIPLES 2. THE BROAD CATEGORY OF DIRECT AND INDIRECT PENALTIES 3. THE DIFFERENT DECRIMINALISATION S MEANINGS 4 DECRIMINALISATION AND SUBJECTIVE OR OBJECTIVE CONDITIONS. 5 DECRIMINALISATION BASED ON COOPERATIVE TAXPAYER S BEHAVIOURS AND OF AGREEMENTS 7. CONCLUSION LORENZO DEL FEDERICO, University of Chieti Pescara (Italy) FRANCESCO MONTANARI, University of Bolzano (Italy) 1. THE SCOPE OF PENALTY AND CRIMINAL PENALTY : A PRELIMINARY OVERVIEW UNDER THE EUROPEAN PRINCIPLES. The analysis of the decriminalisation s phenomenon imposes to delineate what is now criminalized and, therefore, what is the field of the research because the broad conception of penalty is really controversial and it also depends on a political and social choice even before legal one. First of all, it s known that European institutions have not a specific sovereignty and a binding role in the penalties landscape: therefore, EU Member States - and, a fortiori, extra UE Countries - have the power to govern domestic fines autonomously. However, this domestic freedom has to be substantially balanced with the widely accepted conclusion under which the EU States must follow (and interpret their national law in compliance with) the general principles stated by ECJ and ECHR. The statements of the ECHR and of the ECJ are fundamental to identify the notion of penalty and circumscribe the field of investigation but, on the basis of European principles, it s complex and perhaps useless - to define a common and formal label of sanction. Therefore, it seems useful to adopt a functional approach in order to ride out the inevitable defining and categorizing complexity. In the light of ECHR s principles, indeed, the wide notion of criminal charge represents a substantive rather than formal conception despite each national meaning. In general, the ECHR concluded that the act is criminal having regard to the nature of the offence, the purpose and severity of the offence. 1

2 In other words, since 1971 (so called Engel Criteria 1 ), the ECHR but also the ECJ - has appraised the substantial nature of the offence, as opposed to its legal and outward classification under domestic tax law. The ECHR Case law has explained that, substantially, several administrative penalties shall fall under the criminal matters category. In conclusion, the application of both categories of penalties has to be guided by European general accepted principles and individual rights (i.e., the right to silence, ecc). At the same time, it s possible that domestic surcharges or administrative penalties have a cosmetic nature but, substantially, are characterised by a criminal nature despite the formal one. Therefore, the preliminary theoretical and practical matter is that, frequently, administrative and criminal tax penalties are both characterized by a functional identity because they are aimed at afflicting and at re-educating the offender. On the contrary, civil surcharges have different purposes and functions, because their goal is to re-establishing the economic balance existing before the violation and to compensate the prompt tax collection that the State missed. In other words, in many Countries there is a teleological identity as long as both criminal and administrative tax penalties aim at protecting the public interest to an equal and timely tax collection. In this respect, the power to punish for tax violations is functional to the protection of the substantive taxing power. However, some States distinguish between administrative penalties (narrowly linked to tax evasion and tax loss) and penalties characterized by a minor offensiveness but, at once, the different Countries tackle the same problem in diverging ways (see infra IV). The application of criminal or administrative penalties depends on the violation s typology and, frequently, the same contra legem behaviour is punished with different criminal charges and interests are applied (civil surcharges). For example, under Italian Tax Law, taxpayers who do not file intentionally tax returns, one the one hand, are subject to an administrative (financial) tax penalty from 120% to 240% of the taxes due but, on the other hand, if the undeclared tax is higher than , is inflicted a criminal penalty 1 The Court s established case-law sets out three criteria, commonly known as the Engel criteria to be considered in determining whether or not there was a criminal charge. The first criterion is the legal classification of the offence under national law, the second is the very nature of the offence and the third is the degree of severity of the penalty that the person concerned risks incurring. The second and third criteria are alternative and not necessarily cumulative» (case Tomasovic, 2011, 20). 2

3 (imprisonment). Consequently, the quantitative limit and the wilfulness identify the boundary line between criminal behaviours punished by imprisonment and contra legem behaviours punished only by a financial sanction but, following a functional approach, both penalties have the substantial nature or criminal penalties. Against this background, it s clear that the co-existence of different types of sanctions and surcharges has always been a central issue: indeed, there are some fundamental principles that could create many significant problems and, in particular, the application of the prohibition of double jeopardy regarding tax offences (so called ne bis in idem), the principle of specialty and the principle of proportionality 2. Furthermore, the EU Countries adopt different approach referring to the ne bis in idem principle and specialty one. For example, some Countries allow the sum of criminal and administrative penalties but in others a combination of a administrative penalty and a conviction by court (penalty or imprisonment) is not possible. However, it does not always mean that some Countries respect European rights and principles whereas other States violate the latters: indeed, opting for a functional and substantially perspective, it could depends on the fact that in some Countries certain behaviours are punished with light (and not criminal) sanctions but in different States are inflicted relevant (criminal) fines. At the same time, many Countries have already substantially decriminalise significant contra legem taxpayer s conducts on the basis of subjective or objective conditions and, therefore, the preliminary issue is to define the conception of decriminalisation (see, infra, III). Indeed, criminal penalties should only applied for serious tax crimes and the phenomenon of decriminalisation should be appraised only in the landscape of most worrisome and blameworthy taxpayer s behaviours. In conclusion, the convenience to decriminalise certain behaviours concerns an extremely wide complex of punishment s measures depending on the degree of severity. 2 THE BROAD CATEGORY OF DIRECT AND INDIRECT PENALTIES Several European Countries 3 (but also extra UE States, for example, Usa 4 ) are generally defined as self-assessment tax systems. Indeed, taxpayer have to 2 For an analysis, in depth, of this matters see the section II and IV of the EATLP meeting. 3 I.e. Germany, Italy, Spain, France Some Countries provide mix rules depending on the different taxes. For example, in Netherlands Personal income tax, corporate income tax and gift and inheritance tax is 3

4 file by itself an income or VAT tax return, send it to Tax Authorities and concretely solve tax obligations (payment) by a specific deadline. Therefore, taxpayers have to respect many complex duties. Furthermore, a tax system based on self-assessment procedures is a relevant expression of cooperation between taxpayers and Tax authorities. It s clear that the infringement of the different typologies of rules involves, as a direct consequence, the application of a huge variety of sanctions and surcharges depending on the severity of the offense and, in many cases, on the different level of taxpayer s guilt (see retro I and infra III). For the decriminalisation purposes, it s indispensable bearing in mind, on one hand, that the different Countries provide divergent punishment s criteria and severity s level referring to the same contra legem conduct and, on the other hand, that there is a significant range between venial (or slight) infringements and serious violations (see infra IV). In the light of European Countries law it is possible to cluster three cross formal macro-categories of punitive measures: criminal penalties generally punished by imprisonment, administrative penalties and, in the wide sense, other surcharges (such as interests and penalty s payments). But following the abovementioned European principles (see retro I), this adopted categorization is approximate and useful only to give some general guidelines. For example, the case law of some Countries 5 shows that the domestic tax Surcharges are substantially categorised as administrative sanctions still considered as offences according to Article 6 ECHR but in other Countries 6 all criminal charges are not necessarily considered as criminal penalties because lack in ECHR s requirements. At the same time, the application (i.e. in Italy) of a 30% tax increase in the case of delayed tax s payment can be considered a criminal charge : despite the label of this kind of measure (surcharge or administrative penalty), under the European principles this punishment measure is surely afflictive 7. payable upon assessment but wage tax, value added tax (VAT), dividend withholding tax and real estate transfer taxes are levied in the form of self assessment. 4 I.e. USA 5 I.e. Sweden 6 I.e. French 7 For example, in Germany are provided criminal penalties, regulatory penalties and also the so called ancillary tax payments that concern penalties, interests and other surcharges. Regulatory offences shall be classified as criminal penalties in the broader sense of the word but ancillary tax payment, in general, have not this criminal nature. However in same case also the latters have a coercive fines despite the categorisation. 4

5 Again, where a titled administrative penalty is not afflictive because almost negligible (for example, a certain breach of rules is punished by a light fixed sanction,), it fall outside of criminal fines. Against this background, the only conducts that, a priori, denote an absolute criminal nature are those punished by imprisonment: referring to the others surcharges, it s necessary to opt for a functional and a case to case approach strictly linked to the degree of severity. In other words, the decriminalisation s phenomenon can affect an heterogeneous typology of punitive measures regardless their nomen iuris but, at the same time, for many kinds of extremely light penalties there isn t a problem of decriminalisation. Finally, one of the most interesting issue is the emerging phenomenon of many situations in which the taxpayers who violate certain duties, suffer the application of negative consequences, in addition to (or as an alternative to) administrative and, sometimes, criminal tax penalties. Scholars define these further negative consequences as indirect or hidden sanctions 8. These sanctions could be applied as procedural schemes or as substantive alteration of the amount of tax due: indeed, one the one hand, the goal of domestic tax law is preventing or reducing taxpayer s rights to defense both in the administrative phase and in the one before the Tax Court but, on the other hand, the application of indirect penalties can determine the inapplicability of tax deductions and reductions or the increase of taxable income. In other word, it s possible to define indirect penalties the sanctions that are not strictly and immediately linked to the tax evasion s amount. These measures are sometime prohibitive or even afflictive, depending on the choice made by the lawmaker, but in the strict sense of the word, they have a significant afflictive and deterrent nature, even if concurring with other functions, and even if not overriding. Consequently, some scholars retain that the principles regulating the indirect sanctions must be the same of criminal («punitive») law providing a «minimum standard» of procedural guarantees and the application of general principles. This is a typical Italian tax law`s issue 9 but in some European Countries, despite a divergent formal labelling, are provided similar punitive measures. For 8 See DEL FEDERICO, Le sanzioni improprie nel sistema tributario, in Rivista di Diritto Tributario, 1, 2015, The Constitutional Court ruled that the improper sanctions are compliant with the fundamental value of Ability to pay principle, because, calculation of the amount due from taxpayers could be subject to the 5

6 example, it occurs where the tax law 10 prescribes an extra surcharge of 25% in addition to the corporate income tax if the taxpayer does not name and identify the creditors or recipients of the expenses she wants to deduct from her tax base and it might constitute a criminal penalty. In the EU Countries landscape, it s also possible identify an indirect penalty where a cost is not deductible if it s not paid via a financial institution and, therefore, it s impossible to discover the payee 11. Again, in other Countries 12 some tax regimes are on the borderline between substantial rules and punitive measures. An example could be the Belgian fairness tax rules under which it s provided an additional tax on the taxable income of a company that is economically able to distribute profits to its shareholders, but nonetheless is not taxed under the corporate tax regime. This effect is possible because it technically reduces its taxable profits throughout the use of legal tax favours, such as the notional interest deduction or the deduction of earlier losses. Although the company might perfectly administer all of its tax obligations, nonetheless the mere fact of being able to distribute profits, without supporting a corporate taxation, is considered to be unfair. At the same time, some EU Countries consider several titled hidden instruments 13 that, however, substantially diverge from the above-mentioned conception of indirect sanction because they concern different phenomenon then tax law`s one. In conclusion, the decriminalisation phenomenon have to concern also the afflictive indirect sanctions. 3. THE DIFFERENT DECRIMINALISATION S MEANINGS First of all, it s necessary to define the various meaning of the decriminalisation because this latter could considerably diverge depending on the conception of penalty under the domestic law. In the field of tax law, EU member States provide, on the one hand, different prerequisite for the application of criminal and administrative penalties and, on the other hands, specific exemptions but it s possible to identify some common and minimal standards. For example, the application of criminal compliance of a certain duty, This statement does not conflict with the ability to pay principles (ICC, No. 201/1970; ISC No.121/1982). National tax system is based, by nature, on collaboration and good faith duties. Then, lawmaker, is entitles, in a discretionary manner, to punish a non compliant behaviour of taxpayers. (ICC, Orders No. 108/1988; No. 817/1988; No. 1038/1988; No. 246/1993). 10 I.e in Austria 11 I.e. in Denmark 12 I.e. in Belgium 13 I.e. Germany s authorities, in several case of tax fraud, can withdraw the taxpayer s passport. 6

7 penalties requires a minimum level of guilt and, in several Countries precise quantitative limits are provided. Where a specific behaviour lacks in a prerequisite, the penalty cannot be applied but it does not mean that this conduct necessary lacks in offensiveness. For example, Italy and other Countries regulate some exemptions from administrative tax penalties (i.e. force majeure; error on the fact when it is not determined by negligence; excusable ignorantia legis). There are also other principles strictly linked to these prerequisites recognized by several Countries and also by ECJ: for example, the exemption for objective conditions of uncertainty on the scope of application of the tax rule or the general principle of good faith. But the existence of a general exemptions (or the prerequisites lack) does not identify a typical case of decriminalisation because these exemptions express general Constitutional or international principles (i.e. the principle of personality) and if a specific behaviour lacks in a prerequisite, there isn t a violation to decriminalise: indeed, the decriminalisation aims at exempting a specific conduct effectively contra legem. Therefore, the decriminalisation means the legalisation of a specific conduct potentially or factually in contrast to a legal rule depending on different reasons and the fulcrum is to define these latter. In general, the legalisation implies a political and social choice because in a certain age the lawmaker believes that a contra legem behaviour lacks in offensiveness. This is the typical case of the so called formal violations (see infra IV) that do not offense a specific protected good. However, in a wider perspective, this phenomenon is strictly linked to the quantitative, objective and subjective prerequisites for the application of penalties because the Countries could carry out a substantial decriminalisation also limiting these applicability s conditions. In fact, the decriminalisation may also concern the transition by a criminal charge (in a wide sense) to a mere administrative one and this nature s change may depends on different and divergent criteria (subjective, objective or quantitative). The transformation of a criminal penalty punished by the jail in an administrative one or the change of an administrative penalty in a different surcharge, means that a certain infringement has to be punished with minor severity but, at the same time, the law s violation holds at a violation. In other words, under the European conception of criminal penalty and following a functional approach, it s possible to define a kind of 7

8 decriminalisation also where the lawmaker decides to substantially decrease an ordinary administrative penalty. It occurs, for example, if a certain conduct formerly punished with a penalty proportional to the tax evaded became a fixed sanction. But in these case the taxpayer s behaviour does not lack in a condition for the application of the penalties: the lawmaker simply decides to grade the prerequisites to the different levels of behaviours seriousness. In conclusion, the central idea is that, on one hand, it s possible to define divergent meanings of the decriminalisation s phenomenon but, on the other hand, that it s necessary to adopt a pragmatic approach based on the real results of the rule s modification or integration. 4. DECRIMINALISATION AND SUBJECTIVE OR OBJECTIVE CONDITIONS Against this background, it s useful distinguishing further situations and hypothesis and try to suggest some common solutions funded on single domestic tax law in a comparative approach. Firstly, it s possible to obtain a substantial decriminalisation, on one hand, linking the punishments to different levels of guilt and, on the other hands, providing different degree of severity with reference to the effective damage caused by the duty s infringement. However, the best solution would be to mix these criteria. Indeed, in some States criminal charges (in the above-mentioned wide sense, see retro, I, II, III) entail an intentional (or gross negligent) breach of tax rules, but the same contra legem behaviours are set in the field of administrative offence where these are characterized by simple negligence. Following the above-mentioned functional perspective, for the Engel criteria purpose, where a wilful violation is punished by a high fine but the same negligent breach of rule entails the application of a light fixed penalty, the latter behaviour could be considered substantially decriminalised. However, in this field it s necessary to adopt a case to case approach and understand the real repressive nature of the single penalty. For example, Italian tax system does not provide completely fair rules because the different levels of guilt and effective damage put a boundary line between criminal sanctions punished with the affliction of the personal freedom and administrative sanctions punished by high rate (between 100% and 240%). Indeed, subjective and objective criteria are useful only to determine the 8

9 applicable penalty in this severe range of rates but the application of a high proportional fine remains a criminal charge. Therefore, under the European principles both penalties have a criminal nature. In other words, in the field of administrative (but, substantially, criminal), penalties Italian legislation, as well as other European Countries, does not definitely distinguish between slight and gross violations: consequently, a merely negligent conduct (i.e. an incorrect filing) that create a tax damage of is punished in the same way of an intentional behaviour that provokes a loss of On the contrary, other EU Countries 14 provide different levels of severity depending on subjective and objective criteria and, consequently, is better defined the area of low and medium offence (administrative penalties or default surcharges), or high offence (criminal penalties): indeed, the latter are only applied for serious tax crimes characterised by intent or gross negligence. This latter approach seems to be appropriate to safeguard the European needs and, in particular, to avoid the violation of the principles of proportionality 15 and specialty as well as the prohibition of double jeopardy. Moreover, following a wide and substantial decriminalisation s path it s possible to tackle reasonably some relevant situations that periodically involve most of the Countries. The case of the criminalization/decriminalisation of the abuse of tax law seems paradigmatic because it is faced in divergent ways across Europe and the world. Indeed, under the law of some States the abusive behaviours are punished with relevant penalties but in most of them the sanctions are not applicable. Indeed, under the ECJ case law 16 the violation of a general principle created by the case law is not relevant for the application of penalties (administrative and a fortiori criminal). At the same time, the prohibition of the abuse of tax law is becoming one of the main troubles at the international and European level and the absolute decriminalisation of all abusive taxpayer s behaviours seems to be illusory but also unfair. Therefore, also in this field, distinguishing between the different conducts of the tax payer with reference to the higher or lower degree of offensiveness, could be a reasonable answer to balance the different needs of legal certainty and of fair taxation. 14 I.e. Finland, Netherlands, Portugal. 15 It s really interesting to note that in some Countries (for example Sweden) If the amount of surcharge is considered as being unreasonable or disproportionate when taken into account the inaccuracy of the fault, the amount may be completely removed. 16 The leading case is the Halifax, C-255/02, 21 February

10 Consequently, a fulfilling option could be to provide, on one hand, the application of criminal penalties in the case of artificial arrangements that only aim at obtaining outcomes substantially equal to the tax fraud (i.e. simulation or sham transactions ), but, on the other hand, the mere tax s and interests collection where the conduct s goal of the tax payer is genuine but in contrast to general recognized principles and to the so called sprit of the law. However, where the EU Countries adopt divergent solutions respect to similar duty s infringement, at the same time it s possible to identify a common trend and a central idea in the field of decriminalisation of minor infractions. In general, a minor infraction is not a criminal one and it derives from an infringement that does not create a serious tax damage: therefore, several Countries provide specific light surcharges and the minor duties infringements are substantially decriminalised. However, Italy is the only Country 17 that provides a general rule regarding to the mere formal violations: indeed, these latter cannot be punished as long as they are not able to offend the protected interest. The formal violations, indeed, must not compromise tax authorities control activities and not affect the tax basis or the determination of the tax due, such as the wrong indication of a fiscal code in the payment form. 18. The decriminalisation of mere formal violations should derive from the general principles because the taxpayer s behaviour completely lacks social or economic offense. In other words, penalties could not be applied if the contra legem behaviour does not cause a damage and, consequently, it s not reprehensible. However, it is not correct to label, a priori, specific formal violations and it s necessary to value, according to Italian case law, the effective consequences of the taxpayer s infringement. Indeed, on one hand, also a formal violation could be characterized by a high level of offensiveness and, on the other hand, a substantial violation could be inoffensive. In other word, the duties infringements have to be appreciated ex post 19 and not based on a formal categorization of their. Therefore, the fulcrum is understanding what is the protected good by a single tax duty and the taxpayer s contra legem conduct has to be punished only where, in concrete, offends the protected interest. 17 Turkey s Tax law expressly distinguish between tax loss and minor infraction of rules. 18 ISC, Tax Chamber, 4 October 2013, No See ISC, Tax Chamber, 11 december 2013, n

11 Nevertheless, ISC adopt a really restrictive approach. For example, the omitted reverse charge or the late invoicing are not considered mere formal violations 20. In addition, the violation of the principle of fiscal competence does not exempt from penalties DECRIMINALISATION BASED ON COOPERATIVE TAXPAYER S BEHAVIOURS AND AGREEMENTS A specific decriminalisation s typology may also occur when the taxpayers opt for instruments aimed at disclosure their contra legem behaviours or to obtain an advance opinion by the Tax Authorities. Several Countries, indeed, provide different instruments that, on one hand, aim at avoiding a possible taxpayer s breach of rule, on the other hand, allow to legalise tax rule s infringements. In these case the decriminalisation depends on a specific virtuous conduct of the taxpayer or on a tax authority s deed. The most of EU Countries provide advance general ruling 22. Thanks to these procedures, the taxpayers may not be subject to any surcharge of penalty if their behaviours are in accordance with the ruling. In the Europe landscape, there are various kinds of advance ruling, with very different procedures, but all of them have in common the specific aim at giving taxpayers the possibility to request a decision concerning the correct application and interpretation of certain tax rules applicable to a concrete situation. An important common characteristic of these instruments is that, generally, the requests are binding for the tax authorities. In the light of EU Countries domestic law, advance ruling procedures are, essentially, instruments aiming at giving taxpayers the right to know in advance Tax authorities approach in case of objective uncertainty: consequently, those instruments allow the taxpayer to behave in line with such approach. Furthermore, the protection of the taxpayer s legitimate expectations at the end of an advance ruling s procedure is the basic reason that motivates the effects on these mechanisms on tax penalties. Furthermore, several EU Countries provide common guidelines and instruments to improve the tax compliance and the cooperation between taxpayers and tax authorities. 20 See ISC, Tax Chamber, 25 June 2014, No see ISC, Tax Chamber, 21 October 2013, No In some Countries, i.e. Austria, are provided only special ruling referring to reorganization and groups of companies 11

12 In particular, some EU States provide general voluntary disclosure s instruments 23 and the most of these Countries regulate tax agreement s that reduce penalties and surcharges but not decriminalise the taxpayer s conducts. In this landscape it s particular interesting the Poland s active repentance whereby if the offender informs the competent authority about his/her offence before the authority has the information about it, pays the due public revenue and completes some other duties, he or she is entirely exempted from the criminal liability 24. This is a clear situation of completely decriminalisation depending on the taxpayer s self-disclosure but, following the above-mentioned functional and case to case approach, it s possible that also an instruments that only reduce a specific penalty could be considered a case of substantially decriminalisation. It occurs, for example, where, on the basis of a tax agreement, the reduction of a specific criminal charge is so much significant to transform the latter in a penalty of different nature (mere administrative one). Peculiar rules are also provided by Italian Tax Law in the field of Transfer pricing. Indeed, the penalties for the filing of inconsistent income tax return are not applicable in the case where, during access, investigations, audits, or other preliminary Tax authorities' activity, the enterprise submits the necessary documentary support to justify the determination criteria for transfer prices applied towards other non-resident group companies. This is a typical case of automatic decriminalisation depending on the fact that, on one hand, the taxpayer s conduct is in compliance with OECD s guidelines 25 and, on the other and, taxpayers adopt an advance cooperative behaviour: therefore, the taxpayer s behaviour, ab origine, lack in offensiveness despite the concrete application of a different price in the intercompany transaction. Finally, Netherlands (until 2014) and Italy (until 2015) provide specific instruments to voluntary disclose information concerning past assets, such as, a bank account in a foreign country, ecc, without the application of fines. The Italian lawmaker 26, in particular, has just approved a worthwhile new procedure aimed at regularising tax positions of Italian taxpayers who directly or 23 Germany provide a case of voluntary disclosure in the field of criminal monetary penalties. See the German report, p. 16. Czech Republic regulates a specific voluntary disclosure for foreigner tax professionals. See report p. 22. Finally, also Austrian Tax system provides a voluntary disclosure for a specific criminal penalty. See report p See Poland s report, p Indeed, the required documentation consist of the so called master file and country file. 26 Law Decree of 28 January 2014, No. 4, subsequently modified and finally approved by the Italian Senate on 4 December

13 indirectly constituted or held abroad investments and financial activities (e.g. cash and securities, insurance contracts, real estate properties, boats, jewellery and art) in breach of the Italian tax law provisions. In this case the decriminalisation is incomplete because the new voluntary disclosure s instrument is not a tax amnesty and its goal is to decriminalise penalties punished by imprisonment but only to reduce administrative penalties. Indeed, the taxpayers will not be investigated for criminal prosecution for submitting an unfaithful tax return, failure to file the tax return, fraudulent returns based on false invoices or records, fraudulent returns based on other manipulations, failure to pay VAT and failure to pay certified withholding taxes. In addition, subjects are no longer punishable for the crime of money laundering if the criminal offence has been committed in relation to the above tax crimes. 6. CONCLUSION The decriminalisation in the above-mentioned wide sense - of certain taxpayers behaviours could be the high road to safeguard the different needs of member States and of European s general principles traced out by ECHR and ECJ. Furthermore, many Countries have already taken the path of the decriminalisation, at least referring to the domestic penalties punished by the imprisonment, transforming these latter in administrative charges. The reason of this trend is intuitive: on one hand, the criminal prosecutions entail much expenditure of resources 27 and, on the other hand, often many criminal proceedings, are not really effective (for example, in Italy especially because of the running of the periods of prescription). However, the wide notion of criminal penalties impose to adopt a broad conception of decriminalisation despite a formal label. It s clear that the most simple and intuitive kind of decriminalisation is the transformation of a criminal charge punished by the affliction of the personal freedom in an administrative financial penalty. But it represents only a limited matter in the field of decriminalisation. The central idea, however, is that the ways to decriminalise certain taxpayer s behaviour are not, a priori, recognizable and that only a functional and case to case approach could suggests useful solutions. 27 In this sense see also Usa report, p

14 In the light of the recent ECHR and ECJ S case law that explicitly states the prohibition of double jeopardy regarding the same typology of criminal charge and emphasizes the principle of proportionality EU Counties have to find appropriate solutions. Indeed, the application of different (but substantially equal) criminal penalties to the same contra legem behavior it s not in compliance with these principles and a reasonable answer would be to provide different levels of punishments depending on the level of guilt. Against this background, the implementation of not punitive penalties (administrative surcharges) and interests in the case of taxpayers conducts characterised by minor degree of offensiveness, would be in line with the European needs. Therefore, the goal of European Countries should be to avoid cosmetic changes in their punishment s law. For example, where the application of a 10% surcharge in the case of a significant taxpayer delay (i.e. sending the tax return or invoicing) can be labelled as a compensatory measure, at the same time, a 30 or 40% income s increase applicable for a one day s delay has certainly the nature of punitive penalty. Moreover, in the latter hypothesis the punitive nature is confirmed by the circumstance that the interest add up to the high surcharge. In other words, in this basic example, the boundary line between the application of criminal and administrative penalties should be the effective length of the offensive conduct. In conclusion, following a functional and substantial decriminalisation s meaning, the optimal solution could be, on one hand, the application of criminal penalties and interests only in the case of tax fraud or, in general, of intentional and worrisome conducts, on the other hand, the provision of administrative sanctions and interests if taxpayer s behaviours are characterised by a minor social or economic offense. 14