Toward a reinforcement of the fight against fraud?

By Philippe Goossens and Judith Fleuret

On 28 March 2018, the French Government submitted a bill to the Senate aimed at reinforcing the fight against tax, social security and customs fraud.[1]

This bill will be the subject of an expedited parliamentary procedure, a campaign promise of Emmanuel Macron, who indicated that he would make this procedure ‘the default procedure for examining legislative texts in order to accelerate parliamentary business’.[2]

The provisions presented have three objectives: ‘to better detect, understand and sanction fraud’.[3]

Hence, this bill aims first to facilitate exchanges between administrations contributing to the fight against tax, social security and customs fraud by reinforcing, notably, the powers of tax service agents and customs agents, as well as specialised assistants posted or made available by the tax administration and to facilitate the transmission of information by collaborative economy platforms.

In addition, the bill complements and adds weight to the existing repressive arsenal, notably in a greater logic of publicity which, through its effect on reputation, could play a role of deterrent.

Indeed, it is thus provided:

• the obligatory application of the complementary sentence of publication and distribution of tax fraud convictions, which today is optional. Thus, ‘the jurisdiction can rule’ would be replaced by ‘the jurisdiction rules’, except in the event of a specifically motivated decision to the contrary to ensure the conformity of this provision with the Constitution;

• the creation of a complementary administrative sanction to the existing financial sanctions, consisting of making tax assessments and the administrative financial penalties accompanying them public, once they have become definitive. Publication would be on the tax administration’s web site following consultation with a special commission;

• the creation of an administrative sanction applicable to persons who intentionally contribute through their services to fraudulent or abusive schemes. Thus, if the taxpayer is sanctioned for such a scheme by a tax surcharge of 80%, the service provider would incur a 10,000-euro fine, or, if the amount is greater, a fine of the amount of 50% of the revenue generated by the service provided to the taxpayer;

• the intensification of the criminal prosecution of tax fraud crimes of article 1741 of the General Tax Code, by providing that the amount of fines could be brought to twice the product of the infraction for natural persons or multiplied for legal entities;

N.B. the crime of tax fraud is today sanctioned by five years in prison and a fine of 500,000 euros for natural persons and 2,500,000 euros for legal entities, and, in aggravated cases, seven years of prison and a fine of 3,000,000 euros for natural persons and a fine of 15,000,000 for legal entities.

It should be noted that some of these sanctions were already reinforced by the law of 30 December 2017.

• the capacity of the Public Prosecutor to have recourse to appearance procedure upon previous recognition of guilt for tax fraud, a procedure that is today impossible for crimes ‘for which the conduct of the prosecution is provided by a special law’[4];

• the reinforcement of applicable customs sanctions in case of abuse, mistreatment or disturbance of the exercise of the functions of customs agents as well as in the case of a refusal to communicate requested documents.

The minimum amount of the monetary penalty imposed by the judicial authority in case of a refusal to communicate documents would be increased from 1.50 euro per day to 150 euros per day.

Finally, the last article of the bill completes the French list of non-cooperative States and territories in tax matters by incorporating those included on the list adopted by the European Union 5 December 2017 (17 countries): transactions made from or to these States will equally be subject to dissuasive tax measures as well as reinforced obligations and controls.

However, no provision is provided concerning the renowned “Bercy lock,” which would give the monopoly of criminal prosecution to the tax administration in case of tax fraud.

‘The objective is to be more effective in the fight against fraud’. It still remains to be seen if the Ministry of Public Accounts will be supported by the Parliament during the parliamentary debates for a definitive adoption.

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[1] Bill n. 385 registered at the Presidency of the Senate 28 March 2018, presented in the name of Edouard Philippe by Gérald Darmanin

[2] Page 27 of the campaign programme of Emmanuel Macron

[3] Presentation of the motives of the Bill

[4] Article 495-16 of the Code of Criminal Procedure