The European Court of Human Rights in Strasbourg has delivered an important judgment against Sweden which suggests that a person who infringes VAT law cannot be subjected to two penalties for the same offence.

Such a judgment is expected to have a profound impact on the Maltese tax system. It refers to the non bis in idem principle, a fundamental human rights principle which states that no one shall be liable to be tried or punished more than once for the same offence.

In Malta, a person who is in breach of tax laws (mainly VAT and Final Settlement System law) has to pay two penalties, an administrative penalty and a criminal penalty. The Strasbourg court is saying that this is not allowed.

Robert Attard, Partner, tax policy leader central & south east Europe at EY Malta, told The Sunday Times of Malta: “The ECHR judgment against Sweden suggests that a person who infringes VAT law cannot be subjected to two penalties for the same offence. Lucky Dev had infringed Swedish VAT law, and criminal proceedings had been instituted against her. After the criminal proceedings became final, tax proceedings were instituted against her too. The tax proceedings would have resulted in liability to pay a tax surcharge (a tax penalty). The ECHR held that such a situation is not allowed. Lucky Dev should not have been subjected to the tax proceedings, over and above the criminal ­proceedings.”

In its judgment, the ECHR said the applicant’s indictment for a tax offence and the tax surcharges imposed on her were examined by different authorities and courts without the proceedings being connected.

“Both sets of proceedings followed their own separate course and they became final at different times. Moreover, the Supreme Administrative Court did not take into account the fact that the applicant had been acquitted of the tax offence when it refused leave to appeal and thereby made the imposition of tax surcharges final.

“Thus, in accordance with the Swedish system as it stood at the relevant time, the applicant’s conduct as well as her criminal guilt under the Tax Offences Act and her liability to pay tax surcharges under the relevant tax legislation were determined in proceedings that were wholly independent of each other. It cannot be said that there was a close connection, in substance and in time, between the criminal proceedings and the tax proceedings,” the court said.

The court said that the case concerns two parallel and separate sets of proceedings of which the tax proceedings started on June 1, 2004, and were finalised on October 20, 2009, and the criminal proceedings were initiated on August 5, 2005, and became final on January 8, 2009.

“The two proceedings were thus pending concurrently for almost three and a half years. This duplication of proceedings did not involve a breach of Article 4 of Protocol No. 7. However, the tax proceedings were not terminated and the tax surcharges were not quashed after the criminal proceedings had become final but continued for a further nine and a half months until October 20, 2009.

“Therefore, the applicant was tried ‘again’ for an offence for which she had already been finally acquitted.”

The court ruled that for these reasons, there had been a violation of Article 4 of Protocol No. 7 to the Convention, which states: “No one shall be liable to be tried or punished again in ­criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted.”