Payment-Based Reduction in Tax Evasion and the Problem of the Remaining 50 Percent

On 15 April 2022, Law No. 7394 placed before the taxpayer, so to speak, a stick and a carrot at the same time.

The stick; the upper limit of the sentence for issuing and using false documents under Article 359 of the Tax Procedure Law rose from five years to eight, and the extended limitation period climbed to as much as 22.5 years. How far is it compatible with legal certainty for a criminal charge to hang over a citizen like the sword of Damocles for close to a quarter of a century?

The carrot; if the principal tax, the interest and the surcharge together with half of the tax loss penalty are paid, the prison sentence is reduced by half at the investigation stage and by one third at the prosecution stage.

But the legislature had placed a hook inside this carrot; the reduction was conditional on not suing in the tax court or on withdrawing the action. A “blackmail equation” pushing the taxpayer under threat of punishment to give up his constitutional freedom to seek justice. The Constitutional Court unanimously annulled this bar with its decision E. 2022/81, K. 2023/153; the right of access to a court, the presumption of innocence and judicial review of the administration.

The real debate begins exactly here. Can the remaining 50 percent of the tax loss penalty be collected?

The original design of Law No. 7394 was clear; let half be paid and no action brought, and let the reduction apply. The bar on litigation was a mechanical bridge that in effect finalised the remaining half. The Constitutional Court demolished that bridge. The annulment, however, removed the legislature’s unconstitutional method, and not its real intention. The real intention was to limit the taxpayer’s financial burden to 50 percent.

Within this framework the collection of the remaining half is not legally possible. Under the principle of legality of taxation, Article 359 requires only “payment of half” and provides no power to collect the remaining half. Under the ratio legis, the reason for the institution’s existence is to reward the perpetrator concretely; if the remaining half is collected, the carrot rots. The principle of interpretation in favour of the taxpayer likewise imposes a result in the taxpayer’s favour in case of doubt.

The moment the taxpayer pays the 50 percent, regardless of whether he sues, he is relieved of the financial burden in respect of the whole of the tax loss penalty. The action in the tax court remains meaningful only for the principal tax and the late payment interest. The strategy must therefore have two wings; limiting the financial burden to 50 percent in the criminal proceedings, and contesting the unlawfulness of the assessment in the administrative courts to the very end.