Constitutional Court Authorises Cumulative Tax Increase and Penalty

In its decision of 17 November 2022 (case 149/2022), the Constitutional Court held that the tax authorities could impose a tax increase and a penalty for the same infringement, and that under certain conditions this is not incompatible with the non bis in idem principle.

The Court of First Instance of Marche-en-Famenne had requested a preliminary ruling from the Constitutional Court. The case before that court related to a company that had not filed its corporate income tax return in time. The tax authorities imposed a penalty for late filing of €1,250 and a increase of 50% on top of the tax on the company’s deemed profits. The taxpayer appealed the tax on the deemed profit and the 50% tax increase.

Article 444 of the Income Tax Code provides that where a taxpayer fails to file a return, or files a late, incomplete or inaccurate tax return, the taxes due on the part of the income that was not declared or was declared late may be increased depending on the nature and importance of the offense. Article 445 ITC provides that for any infraction of this code, a maximum penalty of €1,250 may be imposed.

Article 225 of the Royal Decree implementing the Income tax Code provides that, in case of a first offence, a 50% tax increase may be imposed if a corporate income tax return is not filed to avoid taxes.

The court asked the Constitutional Court whether articles 444 and 445 ITC infringe the provisions of the Belgian Constitution on non-discrimination and equality, as well as the prohibition to be deprived from one’s property. The court also requested the Constitutional Court examine the right to the protection of property of Article 1 of the First Additional Protocol to the European Convention on Human Rights and the right not to be tried or punished twice of Article 4 of Protocol No. 7 of this convention.

The Court observed that article 444 ITC aims to prevent and fine tax fraud resulting from non-filing or filing an incomplete or incorrect tax return, and that article 445 ITC encourages a timely submission of the tax return.

The Court noted that the non bis in idem principle is infringed when a person who has already been convicted or acquitted is prosecuted for the same infringements in respect of the same essential elements.

As to determining whether the non bis in idem principle was infringed, the Court referred to the decision of the European Court of Human Rights in A and B v. Norway (nos. 24130/11 and 29758/11). This European Court decided that dual proceedings are not excluded if those proceedings are sufficiently closely connected in substance and time. This means the purposes pursued and the means used to achieve those ends should be complementary and linked in time, proportionate and foreseeable for the persons affected. The proceedings should not only in abstracto, but also in concreto, address different aspects of the social misconduct, be foreseeable, avoid duplication in collection and the sanction imposed in the proceedings which are finalised first may not be considered when imposing the sanction on the proceedings finalised last.

The Court held that articles 444 and 445 pursue complementary aims. The first provision aims to safeguard the rights of the treasury while the second provision aims to encourage taxpayers to meet their tax obligations in the future.

It is outside the competence of the Constitutional Court to determine whether a Royal Decree is compatible with the constitution. The Court therefore leaves it to the referring Court to determine whether the penalties are foreseeable, avoid repetition (insofar possible) and are sufficiently connected in time. The referring court has to investigate the proportionality of the penalties

Because the sanctions pursue different aims and are surrounded by different guarantees, the Court held that they are compatible with the provisions of the Belgian constitution and the European Convention on Human Rights.