in Legal Success
| Reading Time: 14 Minutes
What is Tax Evasion Crime and its Penalty?
Tax evasion is a serious crime subject to criminal sanctions in the legal systems of many countries. Tax evasion can be carried out by giving false information or incomplete declarations in tax returns, avoiding paying tax debts, or failing to fulfill tax obligations by other means.
This crime negatively affects the country’s economy by damaging the functioning of the tax system and is a crime that should be deterred with criminal sanctions. For an effective fight against tax evasion, it is important to strengthen the tax system and control mechanisms and raise public awareness.
What is Tax Evasion?
Tax evasion is avoiding or under-declaring tax payments in violation of Tax Laws. This action is taken by people who do not fulfill their tax obligations or submit misleading information on their tax returns. Tax evasion harms the tax system and the country’s economy, causes a decrease in tax revenues, and disrupts justice and equality.
Tax evaders are penalized by the Tax Administration, and the penalties are deterrents. To combat tax evasion, it is important to strengthen the tax system, activate control mechanisms and raise public awareness. In this way, tax evasion is prevented, the country’s economy is strengthened, and the citizens’ sense of rights and justice is preserved.
Introduction: Tax Evasion
Tax is the payments that the state or public legal entities with taxation authority receive from the taxpayers in accordance with the laws according to their financial power to meet the public expenditures based on the sovereign power.
As a result of not fulfilling the tax-related obligations stipulated by the laws with some acts, the nature of the tax, which exceeds its economic power, is related to the public order. For this reason, those who commit these acts are punished with the restraint of freedom. The act doesn’t have to cause a loss of tax, that is, tax loss, to impose a penalty that binds freedom. Tax evasion crime is also a social crime that has a liberty-binding penalty.
Apart from the Penal Law, crimes and punishments can also be established in other laws. However, tax evasion is also a crime but is regulated in the Tax Procedure Law. However, per Article 5 of the Turkish Penal Code (TPC), The general provisions in the TPC are also applied to crimes and penalties in other laws. The criminal court of the first instance is the court in charge of the proceedings related to this crime.
You may be interested in: What Are Economic Crimes in Criminal Law?
What Are The Acts and Sanctions Constituting The Offense of Tax Evasion?
The crime of tax evasion is regulated in Article 359 of the Tax Procedure Law, titled “Smuggling Crimes and Penalties“. The acts specified in this Article are the acts constituting the crime. The punishment for each act is also specified in the law.
Clause a of Article 359 of the Tax Procedure Law is related to the books that are kept or arranged under the Tax Laws and that have to be kept and presented; in the first paragraph of this paragraph, three different offenses are considered. According to this;
Accounting Fraud in Books and Records
It is the act of passing a transaction done correctly before to a ledger that must be kept according to Tax Laws differently than it is.
Opening an Account on Behalf of People Who Are Not Real or Have Nothing to Do With Recorded Transactions
To reduce the tax base, it is a common tax evasion crime that people who do not work or are not related to the recorded transactions are prepared as working payroll, which is stated as an expense.
To Record The Accounts and Transactions That Need to be Recorded in The Books in Whole or Part to Other Books, Documents, or Other Recording Media in Such a Way as to Result in a Decrease in The Tax Base
For the crime to occur, the tax base must be reduced by keeping it notarized for that year and writing it in other illegal books without registering it in the books that must be kept. If it is recorded in the books that are required to be kept and preserved, and if it is recorded in the illegal books, the element of the crime will not occur.
Three acts constituting the crime are specified in the second part of the same paragraph. According to this;
Hiding Notebooks, Records, and Documents
When the books, records, and documents are notarized or fixed by other means, it constitutes the crime of concealing the books and documents by not submitting them to the persons authorized for tax inspection during the examination. Although it is mandatory to keep the books and records that are not kept, and the documents that are not arranged do not constitute the subject of the crime.
Tampering with Books, Records, and Documents
The falsification of duly kept documents, which are obliged to regulate or keep taxpayers in the legislation, constitutes the subject of this crime. The crime of tampering is different from the crime of destruction. Here, the material assets of the documents are protected. However, the contents of these documents can be changed contrary to the law’s and the truth’s correction procedures.
Editing or Using a Misleading Document by Content
A misleading document in terms of its content is a document that is based on a real situation but reflects this situation in an untrue way in terms of nature or amount. These documents are invoices with different upper and lower copies and invoices with incomplete sales.
For example, if an invoice of 200 TL is issued despite selling goods worth 700 TL, this document is misleading regarding its content. While the crime of issuing misleading documents is a crime that the taxpayer can only commit, the crime of using misleading documents is also a crime that can be committed by people who are not taxpayers. The crime of issuing misleading documents occurs during the preparation of documents, and the crime of using the document occurs with the use of the document.
The sanction of the aforementioned crimes, namely those specified in Article 359/a of the Tax Procedure Law, is a prison sentence of eighteen months to five years. In subparagraph b of Article 359 of the Tax Procedure Law, two acts are envisaged for tax evasion crime.
Destroying The Books, Records, and Documents Obligated to Keep, Arrange, Store, and Submit under The Tax Laws, or Putting Other Sheets or Not Putting Any Sheets Instead of Destroying The Ledger Pages
The subject of the crime is the books and documents that must be kept and presented. The most important issue that should not be overlooked here is; although it is obligatory to keep the books and records that are not kept and the documents that are not regulated, they do not constitute the subject of this crime. Another important point is; the act of destroying the books and records kept by the taxpayer voluntarily and the books and records whose retention period has expired do not constitute this crime.
Making or Using the Originals or Copies of Documents as Wholly or Partially Forged
In the law, a forged document is “a document that is prepared as if there is no real transaction or situation“. If a forged document is prepared to show that a crime, treatment, or situation has occurred, it constitutes the crime of issuing forged documents.
In contrast, the use of such a document by recording it in the records constitutes the crime of using a forged document. The sanction of these two crimes, regulated in Article 359/b of the Tax Procedure Law, is specified as imprisonment for three to eight years.
In subparagraph c of Article 359 of the Tax Procedure Law, the act of printing or knowingly using documents that can only be printed by persons who have an agreement with the Ministry of Finance, although they do not have an agreement with the Ministry, is regulated.
Here, the point at issue is to ensure that the documents are not printed in a printing house of the taxpayer that does not have an agreement with the Ministry of Finance. However, knowingly using the documents printed in this way also constitutes this crime. The penalty for this act is imprisonment from two to eight years.
According to the additional provision “ç” added on 29.04.2021, removing the seal of the payment recording device and changing its hardware or software without authorization from the Ministry of Treasury and Finance constitutes a criminal offense.
In addition, physically or digitally interfering with the memory units, electronic circuit elements, external hardware or software connection systems of the payment recording device, electronic control, monitoring systems, or related systems established to prevent off-the-record sales, whether authorized or not, also constitutes a criminal offense.
In addition, software that prevents the recording of financial documents or information related to sales, changing or deleting the recorded information on the payment recording device or other connected hardware and systems, preventing the transmission of documents, information, or data that must be transmitted electronically to the Ministry of Treasury and Finance or other public institutions by electronic control and monitoring systems or related systems established to prevent off-the-record sales, or causing them to be transmitted inaccurately, are also considered as criminal offenses.
The punishment for these offenses is imprisonment for three to eight years. However, individuals who report their involvement to the relevant authority following Article 371 of the Tax Procedure Law may benefit from the provisions of remorse, and this sanction will not be applied to them.
In Article 359 of the Tax Procedure Law, new paragraphs were added in 2022, and some reductions regarding sanctions were regulated. According to this;
- Depending on the determination of the loss of tax due to the actions written in this Article, the whole of the tax, default interest and late fee, and half of the fines and the corresponding late fee, if paid during the investigation phase, the penalty to be imposed is reduced by half.
- In cases where no penalty is imposed depending on the tax and tax original, the penalty to be imposed is reduced by half.
- To benefit from the penalty reduction stated in the paragraphs above, it is obligatory not to file a lawsuit in the tax court, to waive it if it has been filed, not to resort to legal remedies, or to abandon it if it has been applied.
- In case the crimes regulated in this Article are committed within the scope of the execution of the decision to commit the same crime within more than one calendar year or taxation period, Article 43 of the Turkish Penal Code is applied.
- Implementing the penalties in this Article for those who commit smuggling crimes does not prevent the additional application of the tax loss penalty written in Article 344.
What is The Subject of Tax Evasion Crime?
As understood from Article 359 of the Tax Procedure Law, the material subject of the crime of tax evasion is the special books and documents or other recording media in which accounting and transactions are recorded outside of the books, records, and documents that must be kept or issued, and that have storage and submission obligations under Tax Laws.
What is The Prerequisite For Tax Evasion Crime?
Article 359 states that many optional behaviors can be carried out on the books, documents, and records that must be kept or issued and have storage and submission obligations under Tax Laws. Therefore, the books, records, and documents that must be present for the crime of tax evasion can be considered a prerequisite for the offense from one perspective.
It is important to determine whether the mentioned issues are a prerequisite or an element of the crime to determine the existence of intent. If the required condition is a prerequisite, it is sufficient for the perpetrator to be aware of it, whereas if the required condition is an element, the perpetrator must know and want it to occur.
What Are The Elements of Tax Evasion Crime?
The legal and material element of the tax evasion crime is contained in Article 359, the Article in which it is regulated. Accordingly, penalizing those who act in violation of the provisions of the Article only with the penalties specified in the law constitutes the legal element, and acting in violation of the provisions of the Article constitutes the material element of the crime.
However, as stated in Article 331, it is an element of unlawfulness that the legal order does not accept acts complying with the law’s definition. While you can understand all this by looking at Article 359, the moral element of the crime is not explicitly included.
However, in Article 5 of the Turkish Penal Code, “The general provisions of this law are also applicable to crimes in special penal laws.” according to the provision; the moral element, which is one of the founding elements, should also be sought in the formation of the crime of smuggling regulated in the Tax Procedure Law.
Caste is regulated in Article 21/1 of the Turkish Penal Code. If the person knowingly and willingly commits the acts in Article 359 of the Tax Procedure Law, they are held responsible for caste. Possible intent is regulated in Article 21/2 of the Turkish Penal Code.
However, in the justification of Article 21 of the Turkish Penal Code, it is foreseen that crimes that can be committed intentionally can be committed directly and with probable intent in principle. In this case, it is accepted that the acts constituting smuggling crimes can also be committed with probable intent.
Regarding caste, general intent, knowing and wanting the verb, is sufficient. To complete the spiritual element, there is no need to be processed for a specific purpose: special intent. However, some authors are looking for special intent, which causes a decrease in the tax base and causes tax loss in the accounts and transactions that need to be recorded in the books of smuggling.
Since no clear provision in the Article states that smuggling acts can be committed by negligence, as regulated in Article 359 of the Tax Procedure Law, tax evasion cannot be committed by negligence, per the principle of legality in crime and punishment.
What is The Concept of a Perpetrator in Tax Evasion Crime?
In Criminal Law, the perpetrator is the person(s) who commit acts defined as crimes by law. Anyone with rights and duties within the Tax Law relationship is considered a perpetrator when they violate the provisions of Tax Laws, regardless of whether they are taxpayers.
As it can be understood from Article 359 of the Tax Procedure Law, since the legislator did not impose any restrictions on the commission of the crime, the crime is not specific, anyone can commit it, and the perpetrator can be anyone.
The perpetrator can be a natural or a legal person. In legal persons, real persons who use their capacity to act on behalf of the legal entity are used. Therefore, legal persons become the perpetrators of the crime due to their acts contrary to the Article.
What is The Concept of a Victim in Tax Evasion Crime?
In teaching, the victim, in other words, the passive subject of the crime, is divided into two: general and specific. The general passive subject is the state because it is the state that suffers as a result of every crime. A private passive subject is a natural and legal person whose rights and interests are damaged due to the crime. In tax evasion crime, as in all crimes, the state, as a general passive subject, is the victim. However, the public also suffers as a private passive subject. The criminal remedy in these crimes is opened in the name of the public.
What Are The Circumstances Eliminating The Fault in The Offense of Tax Evasion?
However, the fact that the perpetrator has made an act of necessity, fulfilling the orders of the superior, material/moral coercion, and unavoidable mistakes are the reasons that affect the perpetrator’s responsibility for fault. If one of the reasons affecting the fault is found, the penalty is reduced or not given, but the act is still unlawful.
In other words, while the Private Law side of responsibility for the crime continues, the penalty is reduced in the sense of Criminal Law, or no penalty is given. The reasons affecting the defectiveness should be evaluated separately for each concrete case.
It is stipulated that no penalty will be imposed for the crime of tax evasion due to force majeure in Article 373 of the Tax Procedure Law. On the other hand, in Article 13 of the Tax Procedure Law, force majeure is discussed. In 13/3, “compulsory absences that occur against the will of the person“, and in 13/4, “the fact that the books and documents are lost due to reasons beyond the will of the owner” are listed. It is located between moral/material coercion among the reasons affecting the defectiveness.
Coercion is regulated in Article 28 of the Turkish Penal Code; while moral coercion is intimidation and threat, material coercion is coercion and violence. In the case of two other force majeure listed in Article 13 of the Tax Procedure Law, no tax penalty is imposed.
This situation, according to Article 13/1-2 of the Tax Procedure Law, is “a serious accident, serious illness, and detention that prevents the fulfillment of any of the tax duties” and “disasters such as fire, ground shaking (earthquake) and flooding that will prevent the fulfillment of tax duties“.
In Article 369 of the Tax Procedure Law, titled “Error and Change of Opinion“,
“If the competent authorities have given a wrong explanation to the taxpayer in writing or if a case law regarding the implementation of a provision has changed, no tax penalty will be imposed, and no delay interest will be calculated.“
As it is understood from this Article, while the taxpayer’s mistake does not affect the criminal responsibility, in case of a wrong explanation to the taxpayer, the criminal liability of the taxpayer is lifted. However, it is accepted that the rulings issued by the institutions whose purpose is the protection of the rights and interests of their members to announce to their members also remove criminal responsibility.
What Are The Circumstances Eliminating the Crime of Tax Evasion?
The circumstances that eliminate the guilt are considered legal justification reasons. Even though a crime is committed, it can become lawful for certain reasons and no longer be considered a crime. In such cases, the individual’s responsibility arising from the crime is eliminated in terms of Criminal Law and Private Law.
The Turkish Penal Code regulates the legal justification reasons in three Articles and four paragraphs. These are the execution of the statutory duty stipulated in Article 24 of the Turkish Penal Code, legitimate defense and necessity regulated in Article 25 of the Turkish Penal Code, and the exercise of right and consent of the person concerned stipulated in Article 26 of the Turkish Penal Code.
The state of necessity in Article 25 of the Turkish Penal Code defines as;
“The perpetrator is not punished for acts committed against a right that belongs to him/her or someone else, for which there is no deliberate reason and cannot be protected by any other means, with the necessity of getting rid of a grave and certain danger or saving someone else, and on the condition that there is a proportion between the gravity of the danger and the subject and the tool used.“
What Are The Changes Coming With The Latest Regulation on Tax Evasion Crime?
Regarding Article 359 of the Tax Procedure Law, in the Law on the Evaluation of Immovable Property Owned by The Treasury and Amendment of The Value Added Tax Law, which is like a “Bag Law” and entered into force after being published in the Official Gazette dated 15.04.2022, there are changes. According to the 4th, 5th and 6th Articles of the relevant law;
The Upper Limit of Prison Penalties Has Been Increased
Accordingly, while the upper limit was three years in clause a and five years in clauses b, c, and ç depending on the gravity of the acts, with this amendment, the upper limit of three years in clause a was increased to five years. The upper limit of five years in clauses b, c, and ç was increased to eight years.
A regulation similar to the effective repentance system in implementing the Turkish Penal Code has also begun to be applied to tax evasion crimes. An additional paragraph was added to the relevant Article on 8.04.2022. According to this;
“If it is determined that tax was wasted due to the acts written in this Article, the penalty to be imposed is half of the tax, default interest, and late fee, and half of the fines imposed and the corresponding late fee if it is paid during the investigation phase until a verdict is given during the prosecution phase; the penalty to be imposed is reduced by one third.“
The principle of applying the chain crime provisions in the Turkish Penal Code is adopted for the prison sentences for smuggling crimes. However, determining whether there is a chain crime or not will be made by holding a hearing. An additional paragraph was added to the relevant Article on 8.04.2022. According to this;
“In case the crimes regulated in this Article are committed within the scope of the execution of the decision to commit the same crime within more than one calendar year or taxation period, Article 43 of the Turkish Penal Code shall apply.“
Regulations Regarding The Trial Process
“Those who have been sentenced but are in the enforcement phase of their files can benefit from the effective repentance regulation for the investigation stage stipulated in this Article, provided that they pay the full amount of the tax assessed due to the determination of tax damage caused by the acts specified in Article 359, along with the delay interest and delay penalties imposed, as well as half of the fines and related delay penalties within one year from the date of entry into force of the Law that introduced this Article. To benefit from the penalty reduction stipulated in this paragraph, it is a requirement that no lawsuit is filed in the tax court, or if one has been filed, it must be waived, and no legal remedies are sought, or if they have been sought, they must be waived. The provisions of the first paragraph also apply to files in the investigation and prosecution phase at the time of the publication of the Law that introduced this Article. In this case, payment must be made until the sentence is given. For files under review in the appeals or cassation stages for offenses falling within the scope of Article 359 at the time of the publication of the Law that introduced this Article, decisions to overturn will be made for files where favorable evaluation is required due to the regulations made with this Article. Files in the Office of the Prosecutor General of the Court of Cassation are sent to first-instance courts by the proper procedure upon arrival.“
Effective Regret in Tax Evasion Crime
As a result of effective repentance, the penalty to be given to the person(s) is reduced, or no penalty is given. It can be applied in the Turkish Penal Code and the Tax Procedure Law only in cases specified in the law.
According to the paragraph added to Article 359 of the Tax Procedure Law on 29/4/2021, “The provision of this Article does not apply to those who report the situation to the relevant authorities per the conditions of remorse in Article 371.” Accordingly, the perpetrator must notify the relevant units of the situation to implement the repentance and reform provision mentioned in Article 371.
In the law that entered into force with the Official Gazette dated 15.04.2022, temporary Article 34 was added to Article 359 of the Tax Procedure Law. According to this Article, effective remorse in smuggling can also be applied during the investigation or prosecution phase. As a result of effective repentance, the penalty to be imposed for tax evasion is reduced.
In this regulation, no provision prevents them from benefiting from the provision of effective repentance in case of recurrence of the crime.