FOURTH SECTION
DECISION
Application no. 947/13
Jukka Tapani HEINÄNEN
against Finland
The European Court of Human Rights (Fourth Section), sitting on 6 January 2015 as a Chamber composed of:
Guido Raimondi, President,
Päivi Hirvelä,
George Nicolaou,
Nona Tsotsoria,
Zdravka Kalaydjieva,
Krzysztof Wojtyczek,
Faris Vehabović, judges,
and Françoise Elens-Passos, Section Registrar,
Having regard to the above application lodged on 18 December 2012,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,
Having deliberated, decides as follows:
THE FACTS
1. The applicant, Mr Jukka Tapani Heinänen, is a Finnish national, who was born in 1962 and lives in Espoo. He was represented before the Court by Mr Jyrki Kuusivaara, a lawyer practising in Helsinki.
2. The Finnish Government (“the Government”) were represented by their Agent, Mr Arto Kosonen of the Ministry for Foreign Affairs.
A. The circumstances of the case
3. The facts of the case, as submitted by the parties, may be summarised as follows.
Taxation proceedings
4. The applicant owns all the shares in two limited liability companies. Apparently, in spite of their being limited liability companies, he was the only person running them.
5. In 2004 the tax authorities carried out a tax inspection in the first company and concluded that it had failed to declare and pay a considerable amount of tax and that it had, inter alia, paid salaries off the books and undertaken other fraudulent activities. It appeared that the company had been operating entirely on the black market.
6. The tax authorities carried out a tax inspection in the second company after the police investigation concerning the applicant’s activities had been concluded in 2007.
7. On 2 November 2007 the tax authorities imposed additional tax and tax surcharges (veronkorotus, skatteförhöjning) on the applicant for the tax years 2004 and 2005 as they found that the applicant had withdrawn cash from the second company which the tax authorities considered as disguised dividends.
8. On 27 January 2010 the tax authorities imposed additional taxes and tax surcharges on the applicant for the tax year 2004 as they found that the applicant had also withdrawn cash from the first company which was considered as disguised dividends.
9. The applicant apparently did not appeal against those decisions. The period set for appeal in tax matters is five years counted from the beginning of the calendar year following the year when the initial taxation decision was made. Therefore, the taxation concerning the tax years 2004 and 2005 became final on 31 December 2010 and 31 December 2011 respectively.
Criminal proceedings
10. On 18 May 2005 the local tax office requested the police to investigate the applicant’s activities in relation to the first company. On 14 November 2006 the applicant was arrested. On 20 November 2006 a police investigation into the applicant’s actions in the second company was initiated.
11. On 29 June 2007 the prosecutor brought charges against the applicant for, inter alia, aggravated accounting offence (törkeä kirjanpitorikos, grovt bokföringsbrott) and aggravated tax fraud (törkeä veropetos, grovt skattebedrägeri) concerning his activities as the owner of the two companies.
12. On 11 April 2008 the District Court (käräjäoikeus, tingsrätten) delivered its judgment. The applicant appealed against this judgment to the Court of Appeal (hovioikeus, hovrätten), alleging that one of the lay judges sitting in the case had been partial. On 27 June 2008 the Court of Appeal rejected the applicant’s appeal. However, on 6 February 2009 the Supreme Court (korkein oikeus, högsta domstolen) accepted the applicant’s appeal and quashed the lower courts’ judgments. The case was referred back to the District Court for a new examination.
13. On 19 February 2009 the prosecutor repeated the charges. Four counts concerned the applicant’s activity in the first company from 2003 to 2005 and four counts concerned the applicant’s activity in the second company from 2004 to 2005. According to the charges, the applicant was accused of aggravated tax fraud as he had failed to submit a tax declaration for both companies and, consequently, no income tax had been paid or imposed on the companies. On another count of aggravated tax fraud the applicant was accused of not declaring the salaries paid and, consequently, the taxes and social security payments had been too low. The tax authorities joined the charges and presented a compensation claim totalling approximately the amount of avoided taxes.
14. On 13 November 2009 the District Court convicted the applicant, inter alia, of two counts of aggravated tax fraud for having failed to submit a tax declaration for the two companies in question for the tax years 2004 and 2005. He was sentenced to imprisonment for 2 years and 8 months and ordered, together with another convicted person, to pay the tax authorities 435,742.99 euros (EUR) plus interest in compensation. The court also ordered an extended forfeiture of the proceeds of crime. In addition, the applicant was banned from undertaking business activities for five years.
15. By letter dated 12 December 2009 the applicant appealed to the Court of Appeal, requesting that the District Court’s judgment be partly quashed and that a part of the charges be dismissed. He admitted some of the charges. The applicant relied also on the principle of ne bis in idem and the Court’s case-law in that respect with regard to the aggravated tax fraud and the tax surcharges imposed on him in the meantime.
16. On 23 December 2010, after having held an oral hearing, the Court of Appeal upheld the District Court’s judgment. It considered that, as the prosecutor had pressed charges for the first time on 29 June 2007 and the tax surcharges were imposed only after that date, the ne bis in idem principle could not prevent the examination of charges.
17. By letter dated 21 February 2011 the applicant appealed to the Supreme Court, reiterating the grounds of appeal already presented before the Court of Appeal.
18. On 20 June 2012 the Supreme Court, after having examined the question of extended forfeiture of the proceeds of crime and quashed a part of it, upheld the Court of Appeal’s judgment otherwise.
B. Relevant domestic law and practice
19. Section 57, subsection 1, of the Tax Assessment Procedure Act (laki verotusmenettelystä, lagen om beskattningsförfarande, Act no. 1558/1995, as amended by Act no. 1079/2005) provides that if a person has failed to make the required tax returns or has given incomplete, misleading or false information to the tax authorities and tax has therefore been incompletely or partially levied, the taxpayer shall be ordered to pay unpaid taxes together with additional tax and a tax surcharge.
20. According to Chapter 29, sections 1 and 2, of the Penal Code (rikoslaki, strafflagen, as amended by Acts no. 1228/1997 and no. 769/1990), a person who (1) gives a tax authority false information on a fact that influences the assessment of tax, (2) files a tax return concealing a fact that influences the assessment of tax, (3) for the purpose of avoiding tax, fails to observe a duty pertaining to taxation, influencing the assessment of tax, or (4) acts otherwise fraudulently and thereby causes or attempts to cause a tax not to be assessed, or too low a tax to be assessed or a tax to be unduly refunded, shall be sentenced for tax fraud to a fine or to imprisonment for a period of up to two years. If by the tax fraud (1) considerable financial benefit is sought or (2) the offence is committed in a particularly methodical manner and the tax fraud is aggravated when assessed as a whole, the offender shall be sentenced for aggravated tax fraud to imprisonment for a period between four months and four years.
21. The Supreme Court has taken a stand on the ne bis in idem principle in its precedent case KKO 2010:46 which concerned tax surcharges and aggravated tax fraud. In that case it found, inter alia, that even though a final judgment in a taxation case, in which tax surcharges had been imposed, prevented criminal charges being brought about the same matter, such preventive effect could not be applied to pending cases (lis pendens) crossing from administrative proceedings to criminal proceedings or vice versa. However, in July 2013 the Supreme Court reversed its line of interpretation, finding that charges for tax fraud could no longer be brought if there was already a decision to order or not to order tax surcharges in the same matter (KKO 2013:59).
22. The Act on Tax Surcharges and Customs Duty Surcharges Imposed by a Separate Decision (laki erillisellä päätöksellä määrättävästä veron- tai tullinkorotuksesta, lagen om skatteförhöjning och tullhöjning som påförs genom ett särskilt beslut, Act no. 781/2013) entered into force on 1 December 2013. According to the Act, the tax authorities can, when making a tax decision, assess whether to impose a tax surcharge or to report the matter to the police. The tax authorities can decide not to impose a tax surcharge. If they have not reported the matter to the police, a tax surcharge can be imposed by a separate decision by the end of the calendar year following the actual tax decision. If the tax authorities have imposed tax surcharges, they can no longer report the same matter to the police unless, after imposing the tax surcharges, they have received evidence of new or recently revealed facts. If the tax authorities have reported the matter to the police, tax surcharges can, as a rule, no longer be imposed. The purpose of the Act is thus to ensure that a tax or a customs duty matter is processed and possibly punished in only one set of proceedings. The Act does not, however, contain any transitional provisions extending its scope retroactively.
COMPLAINT
23. The applicant complained under Article 4 of Protocol No. 7 to the Convention that the ne bis in idem principle had been violated as he had been convicted in criminal proceedings and tax surcharges had been imposed on the basis of the same facts.
THE LAW
24. The applicant complained under Article 4 of Protocol No. 7 to the Convention about a violation of the ne bis in idem principle.
25. Article 4 of Protocol No. 7 to the Convention reads as follows:
“1. No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State.
2. The provisions of the preceding paragraph shall not prevent the reopening of the case in accordance with the law and penal procedure of the State concerned, if there is evidence of new or newly discovered facts, or if there has been a fundamental defect in the previous proceedings, which could affect the outcome of the case.
3. No derogation from this Article shall be made under Article 15 of the Convention.”
26. The Government noted that the tax decisions of 2 November 2007 and 27 January 2010 concerned disguised dividends and that by these decisions additional taxes and tax surcharges had been imposed on the applicant in his personal taxation for the tax years 2004 and 2005. It was obvious that these proceedings, on the one hand, and the aggravated tax fraud proceedings against the applicant, on the other hand, fell under the scope of “offence” within the meaning of Article 4 of Protocol No. 7.
27. As to whether these proceedings arose from the same facts, the Government argued that it was not the case. The applicant had committed the concrete acts in different ways: the criminal proceedings had concerned the applicant’s failure to declare income to the tax authorities whereas the taxation proceedings had concerned withdrawals of benefits from the companies. The former act had been of long duration whereas the latter had been a short-term, transient act. Moreover, the criminal proceedings had been brought against the applicant as a representative of the two companies. The applicant was obliged to pay tax severally and independently from these companies. The applicant had not been prosecuted or convicted for failure to provide information on his personal taxation. The proceedings did not therefore arise from the same facts.
28. Were the Court to be of another opinion, the Government maintained that the first set of proceedings had not yet become final when the second set of proceedings had been initiated on 29 July 2007. The Court’s case-law did not contain any clear extension of the res judicata criterion to the lis pendens criterion. However, in 2013 the Finnish Supreme Court had extended in its case-law the ne bis in idem prohibition also to parallel proceedings. Also the Court’s case-law had thereafter been clarified in the context of the Glantz and Nykänen judgments.
29. The applicant claimed that both sets of proceedings arose from the same facts, namely from the applicant’s failure to declare income to the tax authorities. Both sets of proceedings also concerned the same period of time and approximately the same amount of evaded taxes in the activities of the two companies. By pursuing two parallel sets of proceedings in the same matter, the State of Finland had violated the ne bis in idem prohibition. At least one of these sets of proceedings should have ceased. It was not relevant whether a decision had become final or not when the parallel proceedings had been initiated.
30. The Court notes first of all that, as to the criminal nature of the impugned proceedings, it is clear that the criminal proceedings for aggravated tax fraud were criminal in nature.
31. As to the criminal nature of tax surcharge proceedings, the Court reiterates that the legal characterisation of the procedure under national law cannot be the sole criterion of relevance for the applicability of the principle of ne bis in idem under Article 4 § 1 of Protocol No. 7. Otherwise, the application of this provision would be left to the discretion of the Contracting States to a degree that might lead to results incompatible with the object and purpose of the Convention (see for example Storbråten v. Norway (dec.), no. 12277/04, ECHR 2007‑... (extracts), with further references). The notion of “penal procedure” in the text of Article 4 of Protocol No. 7 must be interpreted in the light of the general principles concerning the corresponding words “criminal charge” and “penalty” in Articles 6 and 7 of the Convention respectively (see Haarvig v. Norway (dec.), no. 11187/05, 11 December 2007; Rosenquist v. Sweden (dec.), no. 60619/00, 14 September 2004; Manasson v. Sweden (dec.), no. 41265/98, 8 April 2003; Göktan v. France, no. 33402/96, § 48, ECHR 2002-V; Malige v. France, 23 September 1998, § 35, Reports of Judgments and Decisions 1998‑VII; and Nilsson v. Sweden (dec.), no. 73661/01, ECHR 2005‑XIII).
32. The Court’s established case-law sets out three criteria, commonly known as the “Engel criteria” (see Engel and Others v. the Netherlands, 8 June 1976, Series A no. 22), to be considered in determining whether or not there was a “criminal charge”. The first criterion is the legal classification of the offence under national law, the second is the very nature of the offence and the third is the degree of severity of the penalty that the person concerned risks incurring. The second and third criteria are alternative and not necessarily cumulative. This, however, does not rule out a cumulative approach where separate analysis of each criterion does not make it possible to reach a clear conclusion as to the existence of a criminal charge (see Jussila v. Finland [GC], no. 73053/01, §§ 30-31, ECHR 2006‑XIV; and Ezeh and Connors v. the United Kingdom [GC], nos. 39665/98 and 40086/98, §§ 82-86, ECHR 2003‑X).
33. The Court has taken a stand on the criminal nature of tax surcharges, in the context of Article 6 of the Convention, in the case Jussila v. Finland (cited above). In that case the Court found that, regarding the first criterion, it was apparent that the tax surcharges were not classified as criminal but as part of the fiscal regime. This was, however, not decisive but the second criterion, the nature of the offence, was more important. The Court observed that the tax surcharges were imposed by general legal provisions applying to taxpayers generally. Further, under Finnish law, the tax surcharges were not intended as pecuniary compensation for damage but as a punishment to deter re‑offending. The surcharges were thus imposed by a rule, the purpose of which was deterrent and punitive. The Court considered that this established the criminal nature of the offence. Regarding the third Engel criterion, the minor nature of the penalty did not remove the matter from the scope of Article 6. Hence, Article 6 applied under its criminal head notwithstanding the minor nature of the tax surcharge (see Jussila v. Finland [GC], cited above, §§ 37-38). Consequently, proceedings involving tax surcharges are “criminal” also for the purpose of Article 4 of Protocol No. 7.
34. Therefore, in the present case, the Court considers that it is clear that both sets of proceedings are to be regarded as criminal for the purposes of Article 4 of Protocol No. 7 to the Convention. The parties also find this to be undisputed.
35. Turning now to the question of whether the offences for which the applicant was prosecuted were the same (idem), the Court has acknowledged in the case of Sergey Zolotukhin v. Russia (see Sergey Zolotukhin v. Russia [GC], no. 14939/03, §§ 81-84, ECHR 2009) the existence of several approaches to the question of whether this was the case. The Court presented an overview of the existing three different approaches to this question. It found that the existence of a variety of approaches engendered legal uncertainty incompatible with the fundamental right not to be prosecuted twice for the same offence. It was against this background that the Court provided in that case a harmonised interpretation of the notion of the “same offence” for the purposes of Article 4 of Protocol No. 7 to the Convention. In the Zolotukhin case the Court thus found that an approach which emphasised the legal characterisation of the two offences was too restrictive on the rights of the individual. If the Court limited itself to finding that a person was prosecuted for offences having a different legal classification, it risked undermining the guarantee enshrined in Article 4 of Protocol No. 7 rather than rendering it practical and effective as required by the Convention. Accordingly, the Court took the view that Article 4 of Protocol No. 7 had to be understood as prohibiting the prosecution or trial of a second “offence” in so far as it arose from identical facts or facts which were substantially the same. It was therefore important to focus on those facts which constituted a set of concrete factual circumstances involving the same defendant and inextricably linked together in time and space, the existence of which had to be demonstrated in order to secure a conviction or institute criminal proceedings.
36. In the present case the parties disagree on whether the tax surcharge proceedings, on the one hand, and the tax fraud proceedings, on the other hand, arose from the same facts. The Court notes that the first set of proceedings arose from the fact that the applicant, in his personal taxation, had failed to declare some income for the tax years 2004 and 2005. In the second set of proceedings the applicant was accused, as a representative of the two companies, of aggravated tax fraud for having failed to submit a tax declaration to the tax authorities, on behalf of the two companies, concerning the tax years 2004 and 2005.
37. The Court considers that these two sets of facts are different. First of all, the legal entities involved in these proceedings were not the same: in the first set of proceedings it was the applicant in his personal capacity and in the second set of proceedings the two companies whose legal representative the applicant was (see Isaksen v. Norway (dec.), no. 13596/02, 2 October 2003; and mutatis mutandis, Pokis v. Latvia (dec.), no. 528/02, ECHR 2006‑XV; and Agrotexim and Others v. Greece, 24 October 1995, §§ 66-68, Series A no. 330‑A). Even assuming that in both cases it had in fact been the applicant who had made incomplete tax declarations or no declaration at all, the circumstances could still not be regarded as the same: making a tax declaration in personal taxation differs from making a tax declaration for a company as these declarations are made in different forms, they may have been made at a different point in time and, in the case of the companies, may also have involved other persons (see Pirttimäki v. Finland, no. 35232/11, § 51, 20 May 2014).
38. The Court therefore considers that the two impugned sets of proceedings did not constitute a single set of concrete factual circumstances arising from identical facts or facts which were substantially the same. It follows therefore that the applicant’s application under Article 4 of Protocol No. 7 is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 (a) and 4 of the Convention.
For these reasons, the Court, unanimously,
Declares the application inadmissible.
Done in English and notified in writing on 29 January 2015.
Françoise Elens-PassosGuido Raimondi
RegistrarPresident
Full & Egal Universal Law Academy