Tax management is perhaps one of the most serious problems of a businessperson. For a more effective management of their assets and liabilities and in an attempt to gain maximum profit, taxpayers resort to various tricks to circumvent or mitigate their tax obligations.

Tax optimisation is called by specialised doctrine as “legal tax evasion”, and it is premised upon the taxpayer’s ability to choose between the various solutions and alternatives provided by the fiscal law.

However, in practice there is a thin line between lawful and unlawful, i.e. tax optimization and tax evasion. The risk of breaching the law is even higher given the dynamics and the inconsistency of the applicable laws.

The tax/judicial bodies may qualify this conduct as unlawful, and in this case the legal provisions on tax evasion apply, or lawful, in which case the person is, at least apparently, under the shelter of tax optimisation. However, the authorities’ practice in this area is far from consistent.

The phrase “for the purpose of circumventing their tax obligations” is a material condition for the existence of the crime

In the absence of an express legal definition, tax evasion is considered to be a set of intentional crimes aimed at decreasing the tax base, by fraudulent performance or non-performance of tax obligations.

However, in legal practice it was established that not every non-performance of tax obligations constitutes a crime, just those committed for the purposes punished by law, i.e. circumventing tax obligations.

Thus, omitting to pay a tax, such as the value added tax, does not constitute tax evasion unless the taxable asset or source was hidden. If an individual fails to register as a value added tax payer in relation to real estate transfers, tax evasion exists only when the asset or the taxable source was hidden, not when the competent tax bodies were aware of the taxable source’s existence (Decision No. 3907/2012 issued by the High Court of Cassation and Justice).

Cause-Effect Relationship

Tax evasion and money laundering are seldom in a cause-effect relationship, the latter being committed to give the appearance of lawfulness to illegal profit gained further to committing tax evasion.

The extension of criminal prosecution to money laundering has major implications, whereas the criminal prosecution bodies shall order the enforcement of precautionary measures in order to recover the damage caused to the state budget.

Alexandru GOGONEAȚĂ, Associate Specialising in Criminal Law with Țuca Zbârcea & Asociații