The amendment will make it harder for taxpayers to fix mistakes. Active repentance is losing its effectiveness

Active regret will lose its effectiveness, a declaration to this effect will not always allow the entrepreneur to avoid criminal penalties.

Running a business is inextricably linked to a kind of dynamism. The desire to meet changing market requirements, making day-to-day business decisions or delays in the payment of remuneration due from contractors may in some cases result in the omission of a number of obligations, including those to the tax authorities.

This is addressed by the institution commonly referred to as ‘active contrition’, which in strictly defined cases makes it possible to avoid penal fiscal sanctions. It has been regulated in Article 16 § 1-6 of the Act of 10 September 1999 – Fiscal Penal Code(hereinafter also referred to as: “Fiscal PenalCode“), whereby it should be emphasised that it constitutes a peculiar type of admission of guilt in order to avoid responsibility for committed errors.

The institution of active regret will find its application, in particular, if the entrepreneur:

• has not filed a tax return on time;
• failed to pay or paid income tax or VAT in an inappropriate amount;
• has not kept the books of account reliably;
• unreliably issued invoices;
• unlawfully applied reduced VAT rates; – unlawfully applied a VAT exemption;
• illegally applied a VAT exemption;
• concealed the true extent of his economic activity from the tax authorities; and
• he falsified a duty drawback;
• defrauded a customs authorisation.

It should be emphasised at this point that the Ministry of Justice, at the date of drafting this article, is working intensively on significantly restricting the possibility of using a solution which is helpful for entrepreneurs and which is undoubtedly active regret.

The difference between the current legal status and the changes planned by the Ministry of Justice will be presented using the example of a frequently occurring in practice failure on the part of entrepreneurs, i.e. failure to pay or to pay income tax or VAT in the wrong amount within the prescribed time limit.

A detailed discussion of the prerequisites of incurring penal-fiscal liability resulting from the above failure is beyond the scope of this article. For the purpose of this article, it should be pointed out that currently, pursuant to Article 57 § 1 of the Code of Criminal Procedure, a taxpayer who persistently fails to pay tax on time is subject to a fine for a fiscal offence. At the same time, what is at issue here is a numerically expressed amount of money, the payment of which the obliged entrepreneur evaded, as a result of which a financial loss arose on the side of the tax creditor.

The penalty of a fine in this case is imposed in an amount – within the limits of one tenth to twenty times the amount of the minimum remuneration for work, which in 2022 was set at PLN 3,010.00. Consequently, the fine threatening the entrepreneur for a breach under Article 57 §1 of the Code of Criminal Procedure may be imposed in the amount range from PLN 301.00 up to PLN 60,020.00.

An entrepreneur who has failed to pay all or part of the dues resulting from the tax obligation, both now and after the amendment in question, will be able to use the benefit of active contrition in order to avoid penal-fiscal liability, if:

• he notifies the competent authority in writing or verbally into the minutes of the infringement;
• shall pay in full the amount due and owing as a result of the omission committed, together with the interest due thereon.

However, it should be borne in mind that the effective submission of the declaration of active contrition, combined with the payment of the depleted arrears – is inextricably linked to the deadline, the exceeding of which will not allow the entrepreneur to avoid responsibility for his mistakes.

The amendment under consideration, which is illustrated in the table below, may seem cosmetic at first glance(in particular to persons not involved in the daily practice of fiscal penal law).

In order to understand the discussed problem in more detail, it should be indicated in a simplified manner that the conduct of penal-fiscal proceedings by a law enforcement authority(the Tax Office) takes place after a tax inspection is carried out by a relevant authority (the relevant Head of the Tax Office), in which an offence under penalty, in the discussed case resulting from Article 57 §1 of the Code of Criminal Procedure, has been disclosed.

Currently, the legislator gives the entrepreneur the possibility to use the benefit of active regret even in a situation where irregularities are revealed during a tax inspection. After the amendment under consideration enters into force, this will be impossible. The planned amendment effectively limits the possibility to make a declaration of intent in the above scope to the moment of any official action taken against the taxpayer(e.g. checking the correctness of settlements, of which the entrepreneur may not even have relevant knowledge).

The Ministry of Justice argues the desire to amend the provisions relating to active resentment on the grounds that currently it is often impossible to prosecute perpetrators of tax offences and offences disclosed in the course of an audit conducted by an authorised body, albeit other than a law enforcement body.

The proposed amendment should be clearly assessed negatively. The new content of Article 16 § 5 point 2 of the Code of Criminal Procedure raises numerous doubts as to interpretation. The term ” authority ” and ” official acts” used by the Ministry of Justice requires a detailed specification. Currently, it is impossible to clearly indicate which authorities are covered by the scope of the aforementioned provision, as well as what official acts are specifically meant(the proposed term may include both the presentation of an official ID card and verification of the correctness of settlements during a tax inspection).

In addition, the amendment seems to be unduly harsh on taxpayers – after it enters into force, entrepreneurs will largely lose the chance to rectify their mistakes(often unintentional, caused by a simple oversight or temporary payment bottlenecks). Adding to this the current level of complexity of the tax system, its extremely frequent and extensive amendment(vide the so-called “Polish Deal”, the application of which in practice raises a number of doubts also for tax authorities) – the desire to amend the described Article 16 § 5 point 2 of the CCC justifies the statement that it is too severely repressive towards taxpayers.

As at the date of this publication, the draft is at the opinion stage. The course of work on the planned amendment can be followed on the following website of the Government Legislative Process: https://legislacja.rcl.gov.pl/projekt/12357450.