CASE OF PUHK v. ESTONIA
Violation of Art. 7-1 with regard to first law;Violation of Art. 7-1 with regard to second law;Pecuniary damage - claim dismissed;Non-pecuniary damage - financial award;Costs and expenses award - domestic proceedings;Costs and expenses award - Convention proceedings
Nicolas Bratza
8. The applicant was born in 1970 and lives in Tartu. At the material time he was the owner and manager of the company AS Maarja. 9. On 10 August 1995 the Tartu police instituted criminal proceedings against the applicant on charges of tax offences under Article 148-1 § 7 of the Criminal Code. In the course of the preliminary investigation the applicant was further charged with the offence of inadequate accounting under Article 148-4 of the Criminal Code as well as with falsification of documents. 10. On 6 October 1997 the Tartu prosecutor approved the bill of indictment, and the case was sent to the Tartu City Court (Tartu Linnakohus) for trial. The charges set out in the indictment related to acts and omissions of the applicant in the period from April 1993 to October 1995. In particular, under Article 148-1 § 7 of the Criminal Code the acts which were the subject of the charges against the applicant concerned his failures to pay the required taxes, to file by the set deadline revenue statements for the year 1993, to inform the Tax Board of the change of his company's location, and to comply with the order of the Tax Board of 26 October 1995 to pay the required taxes. Under Article 148-4 of the Criminal Code the applicant was accused of having unsatisfactorily arranged his company's bookkeeping, in breach of the legal requirements. The existing records were incomplete and a number of documents had not been preserved, which made it impossible to determine the company's performance. 11. By a judgment of 17 February 1999 the Tartu City Court convicted the applicant of the offences under Article 148-1 § 7 of the Criminal Code and sentenced him to 4 years' imprisonment. It also found the applicant guilty of the offence under Article 148-4 of the Code and sentenced him to 4 months' imprisonment. As the latter sentence was absorbed by the former, the aggregate sentence imposed on the applicant was 4 years' imprisonment, which was suspended for 3 years. The City Court found that the application of Article 148-1 § 7 of the Criminal Code, which had been in force as from 13 January 1995, was justified in the case on the grounds that the applicant's failure to pay the required taxes had been intentional and continuous and his criminal activity had lasted until October 1995. It ordered the applicant to pay the city tax authorities 1,596,618.42 Estonian kroons in outstanding taxes. No fine or tax surcharge was imposed apart from the requirement to pay the taxes which were due under the relevant tax laws. As regards the offence of inadequate accounting under Article 148-4 of the Criminal Code, which was in force as from 20 July 1993, the City Court noted that the applicant's company had operated from 5 May 1993 until 1 October 1993. During that period there had been no recording of its economic activity and it was impossible correctly to determine the company's performance, income, expenditure, profit, loss, debts, solvency or amount of its assets. The applicant had failed to comply with the obligations imposed on him by the Law on personal responsibility for the organisation of accounting. The law came into effect on 20 July 1993, i.e. at the time of the operation of the company, and the applicant, being its owner and manager, had to comply with the provisions of the law. The applicant also failed to adopt rules and procedures for bookkeeping and to secure the preservation of the relevant documents, as required under the Government decree of 6 July 1990 concerning the organisation of accounting. 12. On 26 February 1999 the applicant filed an appeal against the judgment to the Tartu Court of Appeal (Tartu Ringkonnakohus). He argued that in convicting him under Article 148-1 § 7 of the Criminal Code of acts committed prior to its entry into force on 13 January 1995, the City Court had applied the criminal law retrospectively. Before that date a conviction of the offences defined in Article 148-1 could follow only if the person concerned had been previously subjected to an administrative sanction for a similar offence. The applicant further submitted that, in making him responsible for the inadequate bookkeeping in his company during the whole period from 5 May 1993 until 1 October 1993, the City Court had also applied retroactively Article 148-4 of the Criminal Code which had only been in force as from 20 July 1993. 13. On 3 May 1999 the Court of Appeal upheld the judgment of the City Court. It found that the acts with which the applicant was charged under Article 1481 § 7 of the Criminal Code amounted to ongoing crimes. After his first criminal act on 16 April 1993 the applicant had embarked upon a criminal enterprise which had lasted until 26 October 1995, the day on which the Tax Board discovered the abuses and issued its order. Therefore, the City Court had correctly qualified his acts as falling under that law. It also considered that the ongoing nature of the applicant's acts relating to inadequate accounting justified his conviction under Article 148-4 of the Criminal Code. 14. On 1 June 1999 the applicant lodged an appeal on points of law to the Supreme Court (Riigikohus) raising the same arguments as in his appeal to the Court of Appeal. 15. By a judgment of 7 September 1999 the Supreme Court dismissed his appeal. It held that, according to the principles of Estonian criminal law, the law to be applied to a criminal act was the law which had entered into force before the end of a criminal activity. As the applicant's criminal activity ended on 26 October 1995, his actions fell under the law in force at that time, i.e. Article 148-1 § 7 of the Criminal Code. The same reasons applied to the applicant's conviction of inadequate accounting under Article 148-4 of the Criminal Code. 16. The text of Article 148-1 of the Criminal Code, in force until 27 June 1993, was as follows: “Concealment of income or other objects of taxation, or evasion of submission of income tax returns: (1) Concealment of income or other objects of taxation, or submission of knowingly false data in financial statements, tax calculations, income tax returns or other documents relating to the calculation of taxes or payments and their transfer to the budget, or evasion of submission of an income tax return or failure to submit an income tax return on time, if an administrative punishment has been imposed on the offender for a similar offence [italics added], is punishable by a fine or detention or up to three years' imprisonment; (2) The same acts, if committed by a person who has a criminal record for a criminal offence prescribed in paragraph (1) of this article, are punishable by one to five years' imprisonment.” 17. The text of Article 148-1 of the Criminal Code, in force as from 27 June 1993 until 13 January 1995, was as follows: “Evasion of submission of income tax returns or other tax calculations, concealment of income or other objects of taxation, and tax evasion: (1) Evasion of submission of an income tax return, or failure to submit an income tax return on time, or submission of falsified data therein by a person who is required to submit an income tax return, if an administrative punishment has been imposed on the offender for a similar offence [italics added], is punishable by a fine or detention or up to one year's imprisonment; (2) Concealment or reduction of income or other objects of taxation or increase of expenditure for the purpose of concealment or reduction of income or other objects of taxation, or failure to submit or failure to submit on time income tax returns, tax calculations, financial statements or other documents relating to the calculation of taxes or payments and their transfer to the budget, or failure to submit or failure to submit on time accounting documents, contracts or other documents necessary for the assessment and verification of the correctness of taxes, or failure to comply with an order of the Tax Board, by a competent official who is required to perform the corresponding duties, if an administrative punishment has been imposed on the offender for a similar offence [italics added], is punishable by a fine or up to three years' imprisonment; (3) Failure to pay taxes or failure to pay taxes on time, or inadequate compliance or failure to comply with an order issued by the Tax Board for the compulsory collection of taxes by a bank, by a competent official who is required to perform the corresponding duties, if an administrative punishment has been imposed on the offender for a similar offence [italics added], is punishable by a fine or detention or up to three years' imprisonment; (4) Incorrect deduction or failure to deduct personal income tax from the wages (income) of employees, or failure to transfer deducted payments to the budget in full or in a timely manner, by a competent official who is required to perform the corresponding duties, if an administrative punishment has been imposed on the offender for a similar offence [italics added], is punishable by a fine or detention or up to three years' imprisonment; (5) The same acts, if committed by a person who has a criminal record for a criminal offence prescribed in paragraph (1), (2), (3) or (4) of this article are punishable by one to five years' imprisonment; (6) Commission of acts prescribed in paragraph (1), (2), (3) or (4) of this article on a large-scale basis is punishable by up to seven years' imprisonment.” 18. The text of Article 148-1 of the Criminal Code, in force as from 13 January 1995, reads as follows: “Evasion of submission of income tax returns or other tax calculations, concealment of income or other objects of taxation, and tax evasion: (1) Evasion of submission of an income tax return, or failure to submit an income tax return on time, or submission of falsified data therein, if such acts are intentionally committed by a person who is required to submit an income tax return, or if an administrative punishment has been imposed on the offender for a similar offence [italics added], is punishable by a fine or detention or up to one year's imprisonment; (2) Concealment or reduction of income or other objects of taxation or increase of expenditure for the purpose of concealment or reduction of income or other objects of taxation, or failure to submit or failure to submit on time income tax returns, tax calculations, financial statements or other documents relating to the calculation of taxes or payments and their transfer to the budget, or failure to submit or failure to submit on time accounting documents, contracts or other documents necessary for the assessment and verification of the correctness of taxes, or failure to comply with an order of the Tax Board, if the specified acts are intentionally committed by a competent official who is required to perform the corresponding duties, or if an administrative punishment has been imposed on the offender for a similar offence [italics added], is punishable by a fine or detention or up to three years' imprisonment; (3) Failure to pay taxes or failure to pay taxes on time, or inadequate compliance or failure to comply with a precept issued by the Tax Board for the compulsory collection of taxes by a bank, if such acts are intentionally committed by a competent official who is required to perform the corresponding duties, or if an administrative punishment has been imposed on the offender for a similar offence [italics added], is punishable by a fine or detention or up to three years' imprisonment; (4) Incorrect deduction or failure to deduct personal income tax from the wages (income) of employees, or failure to transfer deducted payments to the budget in full or in a timely manner, if such acts are intentionally committed by a competent official who is required to perform the corresponding duties, or if an administrative punishment has been imposed on the offender for a similar offence [italics added], is punishable by a fine or detention or up to three years' imprisonment; (5) Submission of incorrect data or documents upon compulsory registration on the basis of an Act concerning a tax, or concealment of one's residence, place of employment or place of business from a tax authority, or evasion of payment of the taxes provided for in the Taxation Act in any other manner, if such acts are intentionally committed by a competent official who is required to perform the corresponding duties or by a natural person, or if an administrative punishment has been imposed on the offender for a similar offence [italics added], is punishable by a fine or detention or up to three years' imprisonment; (6) The same acts, if committed by a person who has a criminal record for a criminal offence prescribed in paragraph (1), (2), (3), (4) or (5) of this article are punishable by one to five years' imprisonment; (7) Commission of acts prescribed in paragraph (1), (2), (3), (4) or (5) of this article on a large-scale basis is punishable by three to seven years' imprisonment.” 19. Article 148-4 of the Criminal Code, in force as from 20 July 1993, provides as follows: “Inadequate organisation of accounting: Violation of the requirements provided for in legislation regulating accounting or reporting concerning the economic activities, including the commercial or financial activities, or assets of an economic unit, if such violation renders it impossible to correctly ascertain the economic performance, income, expenditure, profit, loss, debts, solvency or amount of assets of the economic unit, is punishable by a fine or deprivation of the right of employment in a particular position or operation in a particular area of activity, or up to one year's imprisonment.” 20. According to the practice of the Supreme Court, if a non-payment of taxes is intentional and continuous the latest version of Article 148-1 is applicable to acts which occurred prior to its entry into force provided that part of the criminal activity took place after the critical date. Criminal liability arises on two alternative, not cumulative, grounds: (1) if a person has committed the offence intentionally or (2) if a person has previously been subjected to administrative punishment for the same offence. Article 148-1 § 7 does not contain a separate offence, but it only qualifies the elements listed in §§ 1-5. Thus, a person may be convicted under Article 148-1 § 7 only if his acts encompass the elements of the offences set out in §§ 1-5. (Decision of the Criminal Division of the Supreme Court of 8 April 1997, Riigi Teataja III 1997, 14, 147; and decision of 27 January 1998, Riigi Teataja III 1998, 10, 104). The Supreme Court has also considered that a constant and continuous violation of the obligation to declare one's sources of income and to pay the required taxes created a persisting criminal state (Decision of the Criminal Division of the Supreme Court of 8 April 1998, case no. 3-1-1-50-98). The Supreme Court has upheld an accused's conviction under Article 148-4 of the Criminal Code concerning inadequate organisation of accounting between 1 January 1995 and 31 March 1996 (Decision of the Criminal Division of the Supreme Court of 31 March 1998, case no. 3-1-1-48-98).