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Saeima: SRS’ planned automatic punishment of tax avoiders may be anti-Constitutional

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvian Saeima’s deputies have doubts about the compliance of automatic punishment of tax avoiders with the country’s Constitution.

On Wednesday, 25 September, Saeima’s Budget and Finance Committee and Legal Affairs Committee held a joint meeting, during which members of both committees discussed the topic of the State Revenue Service’s (SRS) proposal to automatically punish tax avoiders. The aforementioned topic was previously viewed by the Legal Affairs Committee. However, members of the committee had doubts they wanted to discuss in more detail with members of the Budget and Finance Committee.

SRS director Ieva Jaunzeme informed both committees that the income declaration is the only source of information SRS uses to determine how much taxes businesses have to pay. If income is not declared, SRS has no way of knowing how much money is collected for the state budget.

Jaunzeme stressed that this is why it is important for tax payers to submit declarations the day they have to be submitted. According to data from SRS, 82.6% of those who are supposed to submit declarations have done so on time. However, the goal of tax administration is ensuring this ratio reaches at least 98%.

The fiscal influence from non-submitted declaration reaches EUR 100 million.

«This is an enormous amount. This is why we want to provide administrative liability that would be aimed against 16% of those dishonest people,» said Jaunzeme, adding that there are companies that have not submitted any declarations for years.

SRS proposes making sure that automatic penalties are not applied if the deadline for submission of declaration or account was breached for up to two years or if the deadline for the submission monthly declaration for VAT or employers report for the twelve-month period was breached three times for up to five days.

SRS proposes instituting a EUR 25 fine if the deadline for the submission of declaration is delayed for three to ten days, EUR 75 for deadlines missed by 11 to 20 days, EUR 155 for deadlines missed by 21 to 30 days, and EUR 285 for deadlines missed by more than 30 days.

Saeima’s Legal Affairs Committee head Juta Strīķe admits that her led committee has had considerable discussions of the topic of automatic fines, because concerns were raised by the fact that by automatically applying fines would dismiss the subjective explanations from the punished party.

«A person could have become an invalid, ended up hospitalized or even died. This is why this kind of approach to penalties could force them to leave business operations entirely,» adds Strīķe.

Saeima’s Budget and Finance Committee’s representative Vjačeslavs Dombrovskis admits that he sees no reason for SRS’ proposal and no problems whatsoever, especially considering there is no information regarding the size of the companies that do not submit their declarations on time.

«Perhaps the tax volume of those who do not submit declarations reaches a couple of thousand euros. But the entire national economy does not consist of same-sized companies. Are the ones who do not submit declarations even serious companies at all? Why should we discuss companies that are not even companies to begin with?» said Dombrovskis.

The chief of SRS explained that she had not prepared information regarding the profile of dishonest companies. She did say, however that delays with VAT payments amounted to EUR 31 million in 2018, and non-submission of accounts from employers amounted to EUR 36 million. Non-payment of micro-enterprise tax amounted to EUR 9 million. Finance Ministry’s representative Olga Bogdanova added that if there is a duty, there should be a responsibility to perform this duty.

Saeima deputy Jānis Iesalnieks admits that he is not against the idea of automatic penalties, but he does not agree with the statement that most who delay submission of declarations for more than ten days do so with malicious intent.

«Most often delays are caused by accident, not malicious intent. Perhaps it would be best to issue warnings for delays of up to ten days, and only then decide on penalties,» said Isalnieks.

Bogdanova reported that SRS already sends out reminders of the duty to submit declarations in five days. Jaunzeme added that businessmen are already able to inform SRS of delays with submission of declarations.

Saeima deputy Aldis Gobzems agreed with Strīķe’s opinion that automatic punishments exclude the option of providing explanations, thereby limiting human rights, which is against the Constitution. Deputy Dana Reizniece-Ozola added that people are already automatically punished, for road traffic violations, for example. Gobzems, however, says the two situations are incomparable, because tax avoiders, unlike road traffic violators, are the only possible guilty party in their own committed violation.

 Justice Ministry’s representative admits that the Administrative Violations Law already provides that criminal cases can be viewed without involving the guilty party. On top of that, the European Human Rights Convention does not state that it is not required to listen to the person’s opinion in all cases.

Saeima deputy Igors Pimenovs leans towards supporting his colleagues in the opinion that the automatic application of penalties should be discussed in relation to the Constitution, because without doing it there is a risk of litigations.

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