Ruotsalainen v. Finland

16/09/2009 ECHRNe bis in idem

Tax increase and the implementation of criminal responsibility

• Ruotsalainen was stopped by the police during road check. Police found leniently taxed fuel in the applicants pick up van fuel tank. Applicant was fined on 26 February 2001 for petty tax fraud 121 euros. Ruotsalainen used as fuel in his car more leniently taxed fuel than diesel oil without having paid due additional tax (lisävero, tilläggsskatt).

• In separate proceedings, and having received the applicant’s submission in writing on an unspecified date, on 17 September 2001 Vehicle Administration (Ajoneuvokeskus) issued fuel fee debit of 15 137 euros.

Facts of the case

Chapter 29, Article 3, of the Penal Code (rikoslaki, strafflagen; Act no. 769/1990) and sections 20 and 33 of the Motor Vehicle Tax Act (laki moottoriajoneuvoverosta, lagen om skatt på motorfordon; Act no. 722/1966, now repealed) had been applied.

Owners or users of motor vehicles must give prior notice to the authorities of their intention to use such fuel as motor fuel and pay additional tax. (in practice it is way too expensive to pay the additional tax to use such oil as fuel) ◦ Section 20 of the Motor Vehicle Tax Act, which has since been repealed) and/or a fuel fee (section

1 of the Fuel Fee Act as amended by Act no. 234/1998).

◦ Section 16 - Penal provisions◦ Illegal evasion of a fuel fee, and attempted evasion thereof, are punishable under◦ Chapter 29, Articles 1-3, of the Penal Code.

Road checks are used to monitor tax evasion or attempted tax evasion punishable under penal code and failure to comply with the notification punishable as motor vehicle tax offence.◦ Section 33 of the Motor Vehicle Tax Act

Relevant domestic law and practice

• On October 2001 the National Board of Taxes rejected the application for reduction of the fee. It reasoned that no special reason provided for by law to grant a reduction have been put forward.

• Helsinki administrative court, having received the observations of Tax Ombudsman (veroasiamies), Vehicle administration, and applicants observations in reply rejected the appeal.

• The court reasoned that the applicant had conceded that he used incorrect fuel in his vehicle. It was evident that no information had been provided to Vehicle administration (Ajoneuvokeskus) for using leniently taxed fuel

Helsinki administrative court ruled that the imposition of a fee comparable to a tax as here is not an imposition of a criminal punishment or sanction.

The domestic process

“Section 4 of the Fuel Fee Act provides that a fuel fee (polttoainemaksu, bränsleavgift) is collected for the number of days the vehicle has been continuously located in Finland prior to the noted use, but not for more than 20 days at a time. Section 5 provides that the fuel fee for a pickup van is FIM 1,500 [some EUR 252] per diem. Section 6 provides that if the use of more leniently taxed fuel than diesel oil is discovered in a vehicle in respect of which no prior notice has been given, the fuel fee collected is treble the [normal] amount.

The pickup van owned by Pertti Jukka Tapio Ruotsalainen, [registration no.] KJM327, has been noted to have been used during the year 2001 using fuel more leniently taxed than diesel oil. Ruotsalainen had not informed the Vehicle Administration or the Customs thereof [in advance]. In the pre-trial investigation and in his writ of appeal he has conceded that he has used incorrect fuel in his vehicle. The imposition of a fuel fee in an administrative procedure concerns the imposition of a fee comparable to a tax. What is in issue is not the imposition of a criminal punishment or a sanction in lieu.

The imposition of a fuel fee ... is not in breach of the Constitution of Finland or the Convention. Despite the reasons for the use submitted by Ruotsalainen and despite his financial status, the Vehicle Administration was entitled to impose a fuel fee. The fuel fee amounts to FIM 1,500 per diem, it was to be imposed in respect of 20 days and it was to be trebled. The fuel fee FIM 90,000 has been imposed in accordance with the law. There is no reason to amend the debiting decision.”

On 26 February 2003 the Supreme Administrative Court (korkein hallinto-oikeus, högsta förvaltningsdomstolen) refused leave to appeal

• Ruotsalainen lodged an application for reduction of the fee and an appeal with a view that the decision should be overturned arguing  that the fuel fee should have been claimed at the same time as the summary penal order.

Ruotsalainen referred to the Article 7 of the Protocol. The aim of article 4 § 1 of the Protocol is to prohibit the repetition of criminal proceedings that have been concluded by a final decision.

Ruotsalainen:

The principal purpose of the fuel fee was to prevent the use of more leniently taxed fuel in diesel vehicles. The fuel fee alone had no fiscal purpose.

The consequences of the act were also all out of proportion taking into consideration the benefit received (applicant claims only one fill-up was made, it has not been proven wrong)

Although fuel fee was characterized as an administrative sanction it should be equated with a criminal sanction.

The implicit actions of the state in preparing the government bill for the new law, and applying the old law all meant that the objective of the fuel fee act was to prevent the use of more leniently taxed fuel in traffic

In applicant’s view there were many essential similarities between petty fax fraud and fuel fee act, so there was only one punishable act not two as government claims..

The parties’ views in ECHR:

Government submitted that petty tax fraud was an offence under the Penal Code punishable in criminal proceedings by a fine (the amount of the day-fine being dependent on the income and assets of the person concerned). Failure to pay a fine resulted in its being converted to a prison sentence. The increased fuel fee was not a penal sanction but an administrative one, imposed in an administrative procedure and could not, therefore, be equated to a determination of a criminal charge against the applicant.

The Government argued that the present case was similar to the case of Ponsetti and Chesnel in that the constitutive elements of tax fraud and those of failure to file tax returns within the prescribed period (“the fiscal offence”) were different. The cases were also similar in that tax fraud included the element of “wilfulness” whereas the “fiscal offence” was possible on solely objective grounds. On the other hand, when compared to the aforementioned case, it could be noted that in respect of the fuel fee in the present case, the acts underlying the sanctions were even more clearly composed of different elements than the acts giving rise to a tax penalty, as the fuel fee could be imposed even if there had been no intention of tax evasion.

The parties’ views in ECHR:

Whether the two penalties were based on same facts: Whether subsequent issuing of the fuel fee debit arose from the facts as the fine, and whether there was a duplication of proceedings (identical or substantially the same).

First fine was issued on the ground that the applicant had used more leniently taxed fuel than diesel oil without having paid additional tax.

Then in the administrative proceedings fuel fee debit was issued on the ground that applicant had used more leniently taxed fuel without informing the authorities in advance.

To sum up both penal order and fuel fee debit related to using more leniently taxed fuel than diesel oil. Difference is penal order was also related to the fact that applicant had not paid additional tax, and fuel fee debit in comparison related to the fact that applicant had not given prior notice of using more leniently taxed fuel.

Facts do not differ much albeit there was the requirement of intent in the first set of proceedings

The Court’s reasoning

1. Legal classification under national lawThe fiscal nature of the fuel fee under national law, and administrative is not relevant as many criminal acts are punished by administrative process because of triviality

2. Very nature of the offenceTrebled amount seen as punishment to deter re-offending (similiar to criminal penalties). Court: this established criminal nature of the offence.

3. Severity of the penalty

Engel criteria

The ECHR’s autonomous interpretation of the notions of the Convention overrules any national legislation and its legal concepts.The ECHR Cannot, however, change the judgement of the Finnish court. - Finnish double sanction system in tax

matters- Lis pendens and res juricata principles

Supranational law

Nemo debet bis vexari pro una et eadem causa. Nemo debet bis puniri pro uno delicto. A principle of fair trial.

Legal doctrine to the effect that no legal action can be instituted twice for the same cause of action. It is a legal concept originating in Roman Civil Law, but it is essentially the equivalent of the double jeopardy (autrefois acquit) doctrine found in common law jurisdictions. The Finnish legislation did not prevent the simultaneous imposition of a tax increase and a criminal sanction for the same act.

The prohibition of double jeopardy does not apply to Limited Liability Companies

Tax Administration Act (Verotusmenettelylaki) 32 § + Criminal Code Chapter 29, CC Chapter 6 Section 7 (leniency if former tax increase)

Ne bis in idem- double jeopardy

- Supreme Court in 2010:45: the ongoing administrative procedure was not an obstacle for new criminal procedures- Supreme Court in 2010:46: res juricata. Only tax increases that have gained legal force can prevent new proceedings

- Supreme Court in 2013:59: The imposition of tax increase does not have to have gained legal force. The same principle in 2013:78 (the prohibition of criminal proceedings at the moment of the imposition of the tax increase)

- SC in 2013:92: the criminal procedure had began before the imposition of tax increase, which had gained legal force during the criminal procedure. The SC stated that it was in the jurisdiction of the administrative court to decide whether the fact that there was an ongoing criminal procedure had an effect on the imposition tax increase.

Finnish case law after the ruling

The background of the legislation: before the new Act it was mandatory for the tax officials to impose a tax increase when preconditions were met. Therefore the principle of double jeopardy would make it impossible to prosecute.

- Equality of citizens and predictability of legislation has been put under question

- Media attention on “the biggest tax evasion case in history of Finland”

- The Government Bill 191/2012

- The Constitution of Finland 21 § and 22 §- The Charter of European Union article 50- Article 4 of Protocol No. 7 to the Convention for the Protection of Human Rights and Fundamental Freedoms

The new Finnish Act: Laki erillisellä päätöksellä määrättävästä veron- tai tullinkorotuksesta 8.11.2013/781

- The tax officials must choose as early as possible whether to proceed with criminal or administrative sanctions- The exchange of information between tax officials and District Attorneys is crucial- The law states preconditions for new criminal trial in spite of a former tax increase (e.g. when there is new important evidence)- If a new criminal procedure is in order, the preceding administrative sanctions must be voided - Acts and acts by negligence committed after the inauguration on the Act (1.12.2013). No retroactive effect.

- The society has to prevent tax evasion by the means of general prevention

New legislation