18 Mar BRIDGES AND BARRIERS: COUNTERING TAX CRIMES THROUGH COMPARATIVE ANALYSIS

Based on the findings of the focus groups discussions designed for identifying and understanding ground-level problems and solutions related to the current approaches to tax fraud (PROTAX Blog, First Protax Focus Group – Building an effective response to counter tax crimes, 6 March 2019), the PROTAX project is developing an in-depth comparative analysis of the definitions of tax crimes and the main routes followed by law enforcement agencies (LEAs) and judicial authorities to detect, investigate and prosecute relevant cases in the selected EU Member States and the United Kingdom. Consideration of the UK is an essential aspect of this study, especially because on 31 January 2020 this country set the course for leaving the EU after 47 years of memberships and entered into a transition period until the end of 2020 (PROTAX Blog, Policing economic crime post-Brexit, 16 September 2019). Therefore, new rules should regulate the relationships between the EU countries and the UK to avoid raising barriers to cooperation, making legal analysis more important.

Accordingly, PROTAX Consortium is mapping the national legal frameworks through a comparative study. This method not only represents an essential way to analyse legal systems critically and explore new opportunities to reform legislation, but it is also necessary for harmonising different legislation and enhancing cooperation across the EU. Comparison of legal frameworks and practices means to discover the differences and similarities between countries, as well as the strengths and weaknesses of the different approaches in countering tax crimes. In this perspective, the PROTAX analysis pays attention inter alia to:

• The legal sources and the elements defining tax crimes, with a focus on the material and mental elements required by criminal legislation;
• The thresholds according to which tax-related violations can be punished or can lead to an aggravation of criminal liability;
• The criminal sanctions that can be used in case a person is held liable, including imprisonment, fine, accessory penalties and confiscation, with a view to the enforcement of these sanctions and recovery of uncollected taxes;
• The liability of legal entities for having failed to prevent the commission of tax crimes and the role of the compliance programs in fostering good business ethics and corporate citizenship;
• The key actors in combatting against tax crimes, involving not only LEAs but also enablers and whistleblowers, who play an essential role in detecting cases, offering key evidence and deterring tax evasion;
• Importance of and interrelation between anti-corruption laws, criminal laws and tax laws in countering tax crimes;
• The main paths for investigating and prosecuting tax-related crimes, focusing on the repressive and non-repressive compliance schemes; and
• Asset recovery mechanisms related proceeds from tax fraud.

Many studies show a clear interconnection between the scale of the tax evasion and the magnitude of the corruption within the public sector, including tax and customs administration. For this reason, PROTAX is also exploring, from an international, EU and intra-community perspectives, what law enforcement practices are utilised in the context of the corrupt environments and concentrates on the strategic responses given to this issue.

The outputs of this work will be summarised and published in the next blog posts with the aim of supporting:

• The EU institutions in order to understand how to implement the protection of the financial interests of the EU in the upcoming years, currently focused on the transnational serious VAT fraud as defined by the Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against fraud to the Union’s financial interests by means of criminal law, and the challenges deriving from the fact that tax evasion or fraud, beyond this Directive, are not classified as euro-crime according to Article 83(1) of the Treaty on the Functioning of the European Union;
• EU Member States (and other extra-EU countries, especially developing countries) with the purpose of self-assess their criminal provisions and try to find new legislative solutions that could be used in their systems for simplifying criminal law approaches in cases of tax violations, encouraging under certain conditions ex-post tax compliance to recover uncollected taxes, and enforcing criminal sanctions effectively. This aspect of the work is conducted in collaboration with the OECD.
• Authorities in the EU and its Member States that work on cases involving transnational tax crimes so that they can understand the differences between domestic legal frameworks to face practical challenges in cases of judicial and police cooperation in criminal matters;
• Citizens, that need to understand their tax eco-systems better and whistleblowers that should know their rights to blow the whistle, according to the available legal instruments and jurisprudence.

As stated by Professor Umut Turksen during the PROTAX Conference held in Brussels on 22 November 2019, PROTAX’s overall aim is to “harmonise levels of organisation, networking and foreground concerning the importance of the human factor in tax crime enforcement” (PROTAX Conference Report, p. 39). To this end, PROTAX works on the differences between legal systems to find common solutions.

According to Franz Reger of the Austrian Ministry of Finance and leader of the PROTAX task focusing on the comparative analysis of tax crimes and prosecution routes to fight them, “The work in progress represents an essential step to find legal solutions for stronger cooperation between the EU Member States. We will expect from our work new findings that can be used by the policymakers and LEAs.”