A Bulgarian taxpayer operated a local shop where he sold cigarettes. The tax authority found that the taxpayer failed to register the sale of a pack of cigarettes and to issue a fiscal receipt for it.
As a result, the authority:
(a) imposed a fine on the taxpayer
(b) and at the same time applied an administrative measure of sealing the premises for 14 days.
The legislation stipulated that 2 penalty (sanction) proceedings are carried out separately, and there is no possibility of mitigating the cumulative sanctions imposed on the taxpayer.
Is it permissible to apply 2 penalties at the same time for the same VAT violation in 2 independent proceedings?
- The imposition of penalties in the field of VAT constitutes an implementation of Article 2 and Article 273 of the VAT directive – and so, the EU law.
- Therefore it should comply with the principle constituted in Article 50 of the Charter of Fundamental Rights (the ne bis in idem principle, which prohibits the cumulation of proceedings and penalties for the same act).
- To apply this principle, it must be determined that the penalties applied in this case are criminal in nature.
- The penalties are criminal in nature, if the conditions are met as to the legal qualification of the violation of the law, the nature of the violation and the severity of the penalty.
- As for the legal qualification - the penalties in this case are qualified under domestic law as administrative (and not criminal) sanctions. However, this does not preclude it from being considered criminal if the nature of the violation and the severity of the penalty support this.
- As for the nature - in this case, both measures are aimed at punishment (repression) and prevention (deterrence). In particular, sealing is not intended to recover tax claims, collect evidence, or prevent concealment.
- As for the degree of severity - the measures applied appear severe to a high degree. Sealing the premises for many days can prevent an individual entrepreneur from earning income. Likewise, the imposition of a fine of about EUR 250 due to the usurpation of about EUR 0.5 also seems harsh.
- For these reasons, the penalties in this case should be considered criminal in nature.
- Since it is established that the penalties applied in this case are criminal in nature, it is therefore necessary to examine whether Article 50 of the Charter has been violated.
- Article 50 of the Charter is violated, if there is an accumulation of criminal penalties – unless there are strictly enumerated conditions for the application of those penalties. This is not the case here. Double penalties are applied automatically. There are no conditions to apply them.
- Moreover, such cumulation must be proportionate.
- In this case, the national legislation did not provide for the coordination of two parallel sanction proceedings - so as to carry out any mitigation. Nor did the taxpayer have effective means to take into account the coordination of these proceedings and the mitigation of the cumulative sanctions. The sanctions were basically imposed independently.
