The cumulation of administrative sanctions (tax and 231’s) e the European limit of proportionality.

In the 2019 and 2020, our Parliament, driven by the European Regulations, expanded the list of tax crimes punishable by law n. 231/2001, in order to protect the financial interests of the European market (1).

In summary, the commission of one of these crimes by administrators, legal representatives, directors and managers of a company receives a rude answer from the law (2).

In fact, the punishment consists in pecuniary sanctions (with the variable quantification system of "quotas"), interdiction penalties, confiscation of the price or profit of the crime and the possible publication of the conviction (3).

These hybrid (administrative-criminal) sanctions are complemented by administrative-tax penalties, which have long been provided for by Legislative Decree n. 471/1997.

Precisely, that sanctions consist in pecuniary penalties whose amount is calculated by seeking out the amount of tax evasion (i.e., in the case of fraudulent declaration, equal to an amount between 135% and 270% of the higher tax due, see Art. 1, Legislative Decree 471/1997).

The application of both sanctions provided by the Legislative Decree n. 231/2001 and Legislative Decree n. 471/1997 causes the possibility of being prosecuted or punished twice for the same criminalised conduct.

However, it seems that our Parliament did not take care of the consequences caused by the risk of the application of tax sanctions (afflicted by the Financial Administration Authority) and criminal penalties (afflicted by the Court of Law). The worried repercussion might be a clear violation of constitutional principle, such as the ne bis in idem and the proportionality of the penalties.

In fact, a proof of that is the decision of our Legislator to not to extend, even in favor of legal entities, the principle of specialty enunciated by Articles 19 et seq. of Legislative Decree n. 74/2000, in favor of individuals.

These rules provide those administrative sanctions shall not be imposed (or, when imposed, shall not be enforceable) against persons prosecuted for the same conduct also in criminal proceedings.

On the contrary, the Art. 19, par. 2 exactly establishes that the subjects, indicated in the Art. 11, par. 1, of Legislative Decree n. 472/1997 (including, precisely, companies, associations or entities in whose interest the lawbreaker acted), assume the responsibility for the violation and receive the administrative sanctions.

The critical reflection about the double punishment, already criticized by many important authors and professors, is renewed, as the Court of Justice of the European Union has just faced with this question by publishing its judgement on May 5, 2022 (relating to the Case C-570/2020), where it is possible to find out essential principles of law.

In that legal dispute, there were two different parties: the French Government and a French taxpayer.

The Court of Justice of the European Union handled the problem regarding to the double punishment, by applying the principles of proportionality and ne bis in idem, in accordance with the Articles 50 and 52 of the Charter of Fundamental Rights of the European Union (4).

The Court of Justice, following its jurisprudence, declared that the double punishment, although in general it represents an infringement of the EU regulation, is legitimate if (i) it is provided by the law and (ii) secondly if it is proportionated. This means that the law does not exceed the limits of what is appropriate and necessary to achieve the purposes of general interest, recognized by the Union and pursued by this legislation (e.g., the contrast against the VAT carousel fraud).

Accustoming to that jurisprudence, the double punishment is lawful in presence of the following requirements:

1. the law must provide the cumulation of sanctions (the taxpayer should be able to foresee the consequence of its actions);
2. the duplication of sanctions must not exceed what is considered appropriate to repress the sanctioned conduct effectively, proportionately and dissuasively.

On the light of above, the way of how the cumulation of sanctions (tax penalties and crime sanctions in according to the Decree legislative n. 231/2001) is regulated by our legislator might be criticized in respect of the fulfilment of the second requirement.

Indeed, in the before-mentioned cases, this requirement was respected, only about the aspect of the cumulation of financial penalties, as:

1. in France, the national jurisprudence had interpretated the legislation in the sense that the amount of the pecuniary sanctions could not exceed the highest edictal amount of one of the sanctions imposed;
2. in Italy, for example, relating to the crime of market manipulation, the Article 187-terdecies of the Financial Consolidated Act provided (and provides) that, when both a criminal and an administrative pecuniary sanction are imposed for the same conduct the payment of the first one is limited to the part exceeding the amount of the second.

On the contrary, regarding the cumulation of sanctions of different nature (imprisonment, disqualification sanctions and financial penalties), Italian and French regulations were declared incompatible with EU law as they did not provide a mechanism (as the one above) in order to avoid an unproportionate sanction for the same conduct.

In according with the European principles (proportionality of sanctions), a contradiction seems to be recognisable between EU law and the current Italian law. The reason is that the Italian regulation provide a cumulation of sanctions given by Legislative Decree n. 471/1997 and by Legislative Decree n. 231/2001 (both of which are to be considered criminal in nature, in the perspective of EU jurisprudence and the Strasbourg Court (5), which attribute decisive importance to the concrete afflictiveness of the sanctions and not to their name), without any mitigating measure. Concretely, this automatic application of sanctions might introduce a disproportionate penalty regime.

In the end, it can only be hoped that the Legislature could review the discipline of the cumulation of sanctioning and find out a remedy for the possible conflict with Community law, in advance of a possible, future ruling of the Court of Justice, which could find our rules incompatible with European law. This event could happen if the Italian judicial authorities decide to make a reference for a preliminary ruling, on request of the lawyers of taxpayers.

Avv. Paolo Visconti

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(1) Art. 25-quinquesdecies of Legislative Decree n. 231/2001, headed, precisely, "tax offenses," has included in the list of predicate offenses for the existence of administrative liability against the entity, the following criminal cases:

a. the crime of fraudulent declaration through the use of invoices or other documents for non-existent transactions (Art. 2, para. 1, Legislative Decree no. 74/2000;

b. the crime of fraudulent declaration through the use of invoices or other documents for non-existent transactions (Art. 2, co. 2-bis, Legislative Decree 74/2000);

c.  the crime of fraudulent declaration by means of other artifices (Art. 3, Legislative Decree 74/2000);

d. the crime of issuing invoices or other documents for non-existent transactions (Article 8, co. 1, Legislative Decree 74/2000);

e.  the crime of issuing invoices or other documents for non-existent transactions (Art. 8, co. 2-bis, Legislative Decree 74/2000);

f.   the crime of concealment or destruction of accounting documents (Art. 10 Legislative Decree 74/2000);

g. the crime of fraudulent evasion of payment of taxes (Art. 11 L.D. 74/2000);

as well as, if committed as part of cross-border fraudulent schemes and for the purpose of evading value added tax for a total amount of not less than ten million euros:

h. the crime of false declaration (Article 4 of Legislative Decree 74/2000);

i.   the crime of omitted declaration (Art. 5 Legislative Decree 74/2000);

j.   the crime of undue compensation (Art. 10-quater Legislative Decree 74/2000).

(2) Individuals in apical positions (i.e., who assume functions of representation, administration or management of the entity) or individuals subject to the direction or supervision of the latter (Art. 5 Legislative Decree 231/2001).

(3) Art. 9, co. 2, Legislative Decree 231/2001, provides for the following interdiction penalties: a) disqualification from carrying out the activity; b) suspension or revocation of authorizations, licenses or concessions functional to the commission of the offense; c) prohibition from contracting with the public administration, except to obtain the performance of a public service; d) exclusion from facilitations, financing, contributions or subsidies and the possible revocation of those already granted; e) prohibition from advertising goods or services.

(4) French law allows the cumulation of administrative and criminal sanctions (including imprisonment) on the offender, in presence of certain circumstances.

(5) See the judgment of the European Court of Human Rights of December 10, 2020- Appeals no. 68954/13 and 70495/13. It clearly outlines the distinction between sanctions imposed on the entity having criminal nature and sanctions imposed on the entity with not criminal nature.