A ruling by the Constitutional Court on a tax case could result in dozens of claims for wrongful imprisonment and major amendments to tax laws.
The Constitutional Court was asked to overturn a 2012 judgment of the Magistrates’ Court which could have sent Angelo Zahra to jail for as long as 18 months.
Mr Zahra, the sole director of Stratford Co. Ltd, was charged by the police after he failed to submit tax returns between 1998 and 2005. The Court slapped him with an administrative fine of €1,000 but the Attorney General appealed, insisting on a daily fine that could translate to an effective jail term.
The Court of Criminal Appeal found in favour of the Attorney General, imposing the additional daily penalty requested by the prosecution.
Mr Zahra’s argument that he was being charged twice for the same offence was dismissed. Subsequently, Mr Zahra filed a Constitutional Application to the First Hall Civil Court (Constitutional Jurisdiction) but even this application was dismissed.
His lawyer, Robert Attard, refused to give up on the case, filing an appeal to the Constitutional Court on the grounds that his client’s human rights had been infringed because he was being punished twice for the same crime.
This principle was established by the European Court of Human Rights in a case against Sweden last December, which said that a person who infringes VAT law cannot be subjected to two penalties for the same offence.
Those jailed for breach of tax laws could now claim damages for wrongful imprisonment on the same grounds of double punishment
In Malta, a person who is in breach of tax laws (mainly VAT and Final Settlement System law) has to pay both an administrative penalty and a criminal penalty.
The Constitutional Court agreed that there were some instances when the administrative fine was “so severe” that it could be considered to be the equivalent of a criminal one.
The Constitutional Court found the Court of Magistrates’ judgment unconstitutional, declaring it null and void.
The police were ordered to pay Mr Zahra €800 in damages for the anxiety and frustration he faced due to the ruling of the Magistrates’ Court.
The judgment means that those jailed for breach of tax laws could now claim damages for wrongful imprisonment on the same grounds of double punishment.
It could also signal the death knell for clauses in the VAT Act which say that the institution of proceedings or the imposition of a penalty do not relieve the person from prosecution and liability to the payment of an administrative penalty.
Between 2004 and 2012, there were 120 people imprisoned for defaults in VAT payments, with sentences ranging from 12 to 49 months, according to a parliamentary question in 2012. Another 23 were found guilty of breaching VAT law between August 2013 and August 2014 after their fines were converted to imprisonment.
The present government has since made changes to the law to reduce the way in which fines accumulate.