The administrative enforcement of a tax surcharge and the parallel criminal conviction for the same forgery violation violates the ne bis in idem principle. Fines and penalties are criminal in nature

JUDGMENT

Bjarni Ármannsson v. Iceland  16.04.2019 (no. 72098/14)

see here

SUMMARY

The imposition of tax surcharges and fines by the tax authorities is of a criminal nature. At the expense of the applicant, the tax authorities irrevocably charged a 25% surcharge on the tax due and paid them together with the taxes. At the same time, he was prosecuted for the tax offense and prosecuted and was irrevocably sentenced to eight months’ imprisonment and a fine. Complaint that the applicant’s conviction for tax offenses violated the ne bis in idem principle. In particular, the Court noted that these procedures were overlapping and indeed the applicant had been tried and punished twice for the same offense. Infringement of Article 4 of the 7th Additional Protocol to the ECHR.

PROVISION 

Article 4 of the 7th Additional Protocol

PRINCIPAL FACTS 

The applicant, Bjarni Ármannsson, is an Icelandic national who was born in 1968 and lives in
Frederiksberg, Denmark. He was the CEO of one of Iceland’s largest banks, Glitnir, from September
1997 to April 2007.

In July 2009 the Directorate of Tax Investigation began an audit of Mr Ármannsson’s tax returns to
examine whether he had declared profits from selling shares he had received when he had stepped
down as the CEO of Glitnir.

The investigation was concluded with a report and Mr Ármannsson was informed that the case had
been referred to the Directorate of Internal Revenue for possible reassessment of his taxes. In
January 2012 the latter sent him a notification letter which stated that his taxes for the tax years of
2007 to 2009 had been re-assessed.

It also found that, based on the audit report and taking into account the applicant’s objections, he
had failed to declare significant capital income received from 2006 to 2008. It therefore re-assessed
his taxes and imposed a 25% surcharge. Mr Ármannsson paid the taxes and the surcharge. The
Directorate of Internal Revenue’s decision became final in August 2012.

In March 2012 the Directorate of Tax Investigation reported the matter to the Special Prosecutor. Mr
Ármannsson’s lawyer protested and argued that the deadline to object to the tax reassessment had
not expired and that the referral was ill-founded.

In December 2012 the Special Prosecutor, however, indicted Mr Ármannsson for failing to declare
income in his tax returns of 2007 to 2009. The District Court convicted him of these charges in June
2013 and sentenced him to six months’ imprisonment, suspended for two years, and the payment of
a fine of 38.85 million Icelandic Krónur (ISK; approximately 241,000 euros).

He appealed but by a judgment of May 2014 the Supreme Court rejected his request to dismiss the
case and upheld his conviction. His sentence was increased to eight months’ imprisonment, again
suspended for two years, and the fine was reduced to ISK 35.85 million.

THE DECISION OF THE COURT

Article 4 of Protocol No. 7

Under Article 4 of Protocol No. 7, the Court had to determine whether the imposition of tax
surcharges was criminal in nature, whether the criminal offence for which the applicant was
prosecuted and convicted was the same as that for which the tax surcharges were imposed (idem),
whether there was a final decision and whether there was duplication of the proceedings (bis).
Having established that the two proceedings concerned a criminal offence, that the offence was the
same offence (the idem part), and that the decisions were final, the Court proceeded to examine in
detail the question of duplication (the bis part) within the meaning of the European Convention. As
stated in the Grand Chamber Judgment in the case of A and B v. Norway, for the Court to be satisfied
that there was no duplication of trial or punishment (bis), the respondent State must demonstrate
convincingly that the dual proceedings in question had been “sufficiently closely connected in
substance and in time”.
Assessing the connection in substance between the tax and the criminal proceedings, the Court
accepted that they had pursued a complementary purpose in addressing the issue of a taxpayer’s
failure to comply with the legal requirements relating to the filing of tax returns. Furthermore, the
consequences of Mr Ármannsson’s conduct had been foreseeable: the imposition of tax surcharges,
the indictment and the conviction had been among the possible actions and penalties levied under
Icelandic law for failure to provide accurate information in a tax return.

The Court also considered that the domestic courts’ sentencing in the criminal case had taken
sufficient account of the penalties imposed in the tax proceedings.

The police had conducted their own, independent investigation, which had resulted in Mr
Ármannsson’s conviction. His conduct and liability under the different provisions of tax and criminal
law had therefore been examined by different authorities and courts in proceedings that were
largely independent of each other.

Turning to the connection in time between the two sets of proceedings, the Court noted that the
overall length of the proceedings was about five years and 10 months. During that period, the
proceedings had in effect progressed in parallel only between March 2012, when the Directorate of
Tax Investigation had reported the matter to the Special Prosecutor, and August 2012, when the
Directorate of Internal Revenue’s decision had become final.

Moreover, Mr Ármannsson had been indicted seven months after the final decision by the
Directorate of Internal Revenue had acquired legal force. The criminal proceedings had then
continued on their own for two years and nine months, until the Supreme Court’s judgment.
Given those circumstances, in particular the lack of an overlap in time and the largely independent
collection and assessment of evidence, the Court could not find that there had been a sufficiently
close connection in substance and in time between the tax proceedings and the criminal
proceedings for them to be compatible with the bis criterion in Article 4 of Protocol No. 7.

Consequently, Mr Ármannsson had been tried and punished for the same or substantially the same
conduct by different authorities in two different sets of proceedings which had lacked the required
connection.

There had therefore been a violation of Article 4 of Protocol No. 7.

Just satisfaction (Article 41)

The Court held that Iceland was to pay the applicant 5,000 euros (EUR) in respect of non-pecuniary
damage and EUR 29,800 in respect of costs and expenses(echrcaselaw.com editing).


ECHRCaseLaw

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