Subversion of Criminal Law in Brazil: Subsidiary Instrument to Protect Fundamental Legal Goods or an Instrument of Intimidation with the Aim of Raising Tax Revenue?

According to Claus Roxin (A proteção de bens jurídicos como função do Direito Penal. Organização e tradução: André Luís Callegari e Nereu José Giacomolli. 3. ed. Porto Alegre: Livraria do Advogado Editora, 2018), criminal law is supposed to protect fundamental legal goods, assuring citizens a peaceful and free co-existence, under the guarantee of all human rights. This protection, however, is said to be subsidiary according to the same author, since criminal law must be the ultima ratio – ie, the last resource available to the Democratic State under the Rule of Law to deal with social conflicts.

This is because the most intense instruments of deviance control are at the disposal of criminal law, such as coercion, use of force and deprivation of liberty, which should only be utilised in the worst conflicts between individuals (HASSEMER, Winfried. Introdução aos fundamentos do direito penal (Einfürung in die Grundlagen des Strafrechts). Tradução da 2ª edição alemã, revisada e ampliada, de Pablo Rodrigo Alflen da Silva. Porto Alegre/RS: Segio Antonio Fabris Editor, 2005).

Finally, criminal law should punish actual conduct, for it would cease to be a legitimate instrument if individuals were punished for what they are rather than what they did (JUNQUEIRA, Gustavo Octaviano Diniz. Finalidades da pena. Barueri/SP: Manole, 2004).

Once a certain conduct is criminalised, the State symbolically affirms that it causes (or at least risks causing) serious harm to the social order, and also communicates that there is no less rigorous instrument than a criminal penalty to deal with the problem. In Brazil, Article 59 of the Penal Code states that a criminal penalty should be set by the judge as necessary and sufficient to both reprove and prevent the crime.

Regarding tax evasion, Articles 1 and 2 of Law No 8137/1990 criminalise an extensive list of conducts, such as deliberately under-reporting or omitting income, claiming false or overstated deductions on a return, or hiding or transferring assets or income. The criminal penalties vary between two and five years of detention for the conducts listed in Article 1, and between six months and two years for those listed in Article 2.

However, the crime is extinguished if the defendant pays the full amount of the tax debt and its accessories (fines that can exceed 200% of the tax evaded plus huge interest rates plus a monetary correction) at any time, even after the criminal conviction is final and unappealable.

In addition, if the defendant agrees to pay the total amount of the tax debt and its accessories in installments before the Public Prosecutor's charge is analysed by the judge, the criminal procedure is suspended until the payment is carried out; the crime is also extinguished when the payment is made.

The situation described is problematic. Once the aforementioned list of tax evasion conducts is criminalised, the State symbolically affirms that no instrument other than criminal law is sufficient to deal with the seriousness of the matter. Moreover, criminal penalties are intended for those who practise such conducts, and the Penal Code states that the judge should set the penalties as necessary and sufficient to both prevent and reprove the crime, again indicating that criminal repression would be imperative in those cases.

The question that arises is: if the payment of the tax evaded (plus its accessories) is enough to extinguish the crime, why was that list of conducts criminalised in the first place? Wouldn't the tax enforcement procedures be enough, for example, considering that even the minimum criminal penalty is not applicable after payment?

Consequently, criminal law, which was once a subsidiary instrument to protect fundamental legal goods, is subverted into an instrument of intimidation with an eminent purpose of raising tax revenue. In other words, it becomes a mechanism to threaten individuals to pay their tax debts, since the criminal conduct of tax evasion itself seems to become irrelevant once the money is collected.

To reinforce this argument, let's imagine that an individual steals a cellphone from a large department store. Feeling repentant a couple of days after, he decides to return it before the Public Prosecutor's charge is even analysed by the judge. In that case, the Penal Code states that there will be a reduction of one to two-thirds of the criminal penalty imposed, but the crime will not be extinguished. Therefore, the price of the cellphone and the fact that it was returned are only relevant to guide the intensity of the criminal penalty, because the true reason for the use of the criminal justice system is to sanction the act of stealing.

On the contrary, in tax evasion crimes, the conducts described in law merely authorise the State to use criminal proceedings to threaten individuals, so that the amount due can be collected. It is possible, therefore, to state that criminal law intends not to punish the act of evading taxes, but to punish the tax evader who will not pay their tax debt under the specified conditions.

From the State's point of view, the act of stealing would be more harmful than the act of evading taxes, as can be seen, even though it is quite rare that somebody steals something with a comparable value to substantial tax evasions.

There are several ways to try to explain it. It could be said that there is a utilitarian reason for extinguishing the crime of the person who fully pays the tax evaded, since it would be better to incorporate the money evaded into the Treasury than to punish the individual with a criminal penalty and not have the amount collected. On the other hand, it is also possible to say that criminal law works in different ways depending on the public at which it is aimed, as denounced by Eugenio Raúl Zaffaroni (Direito Penal brasileiro: primeiro volume – Teoria geral do Direito Penal. 4. ed. Rio de Janeiro: Revan, 2011), among many others.

In a third world country such as Brazil, the crime of stealing, for example, is usually committed by the most vulnerable members of the population, whilst the big tax evasions are obviously committed by the wealthiest: while the most vulnerable part of the population will be offered a reduction on criminal penalties if they return the stolen object, the wealthiest will have their crimes extinguished by returning the tax evaded and paying fines.

It is possible that both justifications are correct (utilitarianism and criminal selectivity), just as it is possible to raise other answers. However, it is important to highlight and conclude that the criminalisation of tax evasion in Brazil (especially those examples mentioned herein), at the very least, seems to escape the logic that legitimises criminal law as an ultima ratio instrument aimed at punishing conduct.

First, it is used to raise tax revenue, and not to subsidiarily protect fundamental legal goods: what is intended is not a criminal punishment for evading taxes to reprove and prevent said crime, but to threaten individuals via criminal procedure so that their tax debt is paid. Secondly, it is not true that all tax evasion conducts are considered criminal by the Brazilian State: only those practised by individuals who are not able to afford the payment of the tax debt.