Rec., 372 Case Association locale pour le culte des témoins de Jéhovah de Riom
05 April 1996
Translated by:
Tony Weir
Professor Sir B. S. Markesinis

The principle that a new penal law which decriminalises conduct or reduces the sanctions laid down in prior law applies to past conduct, unless a conviction for it has become res judicata, extends to the provision in article 1729-1 of the General Tax Code that the taxes payable may be increased if the taxpayer is in bad faith. Since such increases are tantamount to a punishment designed to prevent repetition of the conduct in question rather than to exact compensation for financial loss, they constitute sanctions which fall under the principle that punishments must be necessary, as laid down in article 8 of the Declaration of the Rights of Man and Citizen of 1789 –“the law may lay down only such penalties as are strictly and manifestly necessary” – and this is true even if the legislator has left it to the administration to establish the necessary conduct and apply the increases;

A tax judge faced with a dispute about such penalties must ex officio ascertain if the new law prescribes milder sanctions and is applicable. If so, he cannot accept the arguments addressed to him without misapplying the law which is now applicable, for it is the law at the time of his decision which must be applied, as in the case of normal litigation;

Article 2 (I)(a). (now article 1727(1) of the General Tax Code) of the Law of 8 July 1987 which modified fiscal and customs procedures provides that: “Regardless of all other sanctions, interest is due for delay in the event of non-payment or inadequate or late payment of any of the taxes, customs duties, levies, charges or sums established as due by the Directorate General of Taxes.” Article 2(III) (now article 1729-I of the Code) provides that “If the details given in a taxpayer’s declaration are an inadequate, inaccurate or incomplete basis for assessment, the sum payable by him is increased by 1° interest for delay under paragraph I…, 2° 40% if it is established that the taxpayer was in bad faith.” These provisions show that the interest charged for delay is not a sanction but compensation for the monetary loss suffered by the Treasury through the tax not being paid at all or in full or promptly. Consequently in order to determine whether the sanction prescribed by article 1729-I of the General Tax Code (from the Law of 8 July 1987) is milder than that in previous legislation one must look only to the increase which the new text introduces in the case of bad faith, ignoring the provisions on interest for delay, and in order to make the comparison required by the principles stated above one must look to the rules previously applicable in order to discern what part of the increase can be regarded as a sanction. Here one must disregard the part corresponding to interest, which remains payable even if the judge cancels the penalties.

It follows that the judge must apply the 40% increase only when such a comparison on the documents shows that it constitutes a milder penalty;

If milder penalties under the new law fall to be applied the tax judge must himself substitute them for the increases claimed by the administration. It is true that just as the previous law tailored its penalties to the conduct of the taxpayer, the Law of 8 July 1987 provides for differential increases depending on how the taxpayer’s conduct is to be regarded, but nevertheless once the judge has verified the administration’s view of the taxpayer’s conduct he must apply the appropriate increase as laid down in the law and has no power to modify it in the light of the seriousness or otherwise of the fault of the taxpayer.

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