Until now, if an entrepreneur committed a violation in the field of tax law, this was interpreted as an intentional act, namely, the presumption of guilt was applied. In April of this year, an important decision was made by the Constitutional Court, which will change this approach.
The aphorism of “It is natural for human beings to make mistakes” is well-known because no one is born with an adequate set of knowledge and skills to perform a particular job at once, and they are learned during life. There are also a variety of objective and subjective considerations that can lead to mistakes in the performance of duties. Therefore, although not desirable, they tend to happen. Therefore, it seems self-evident that the legislator, for example, has limited the civil liability of an employee to the damage suffered by the employer.
However, there is one category of people, which has so far been an exception, at least in the field of tax law, namely entrepreneurs whose competence and capacity in the field of taxation were presented at the highest level - any infringement of tax law was treated as intentional - a presumption of guilt applied. And it is not only about the application of legal norms and their concerns, which rights specialists have expressed concern publicly for some time, but also about the problems in the legislative process - about how we perceive and position a businessman in Latvia at the political level.
Given that the economic activity is one of the fundamental features of the state and is directly linked to the welfare of the state's population, it would be reasonable to expect the state to promote business by providing for certain and effective support mechanisms, including, but not limited to, reasonable and fair penalties for tax infringements, as untreated entrepreneurs also disrupt those who perform their duties with the best conscience. On the other hand, the application of an unduly harsh penalty does not only achieve its legitimate objective, namely to deter persons from committing such offenses, thereby protecting public interests, but also to encourage entrepreneurs to develop their economic activities directly in Latvia. Consequently, unjustified severe penalties can also lead to a drop in tax revenues and a decline in public welfare in the long term.
The legislator needs to change
From time to time, the State Revenue Service (SRS) has been able to improve the quality of its work by giving more active advice to entrepreneurs and also by assessing the need for continued legal proceedings to be lost before the Court of First Instance - it is certainly positive and should be continued. But for improvements to be sustainable and to bring long-term benefits to society and the general public economy, there must be positive changes to the legislative process, along the lines of legislation.
The Constitutional Court has usually limited itself in matters of tax law, stating that “the state, when determining and implementing its tax policy, has a wide discretion” (see, for example, the judgment of the ST of 6 December 2010 in case 2010-25-01 ). However, at the beginning of April this year, it gave a strong signal of the need to individualize penalties for certain tax offenses, but this was unduly tacitly accepted.
The judgment of 6 April 2021 in case 2020-31-01 was challenged in Section 34 (1) of the Law “On Taxes and Duties”, which provided that if a legal person or a natural person registered as an economic operator, performs economic activity without registering as a specific taxpayer, or within 30 days after the deadline specified by the tax administration does not submit tax declarations provided for in tax laws, as well as economic activity and accounting documents required by the tax administration, without which tax administration officials (employees) can not determine the amount of tax payable, then the tax administration, performing a tax audit, calculates and collects for the benefit of the budget from the taxpayer the tax calculated for the taxation period from the day when the person had to register as a particular taxpayer, late payment fee specified in Section 29, Paragraph two of this Law and a fine of 100 percent of the amount to be paid to the budget from tax amounts.
Original article translated from the Russian language. Source: “iFinanses”