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Programme: one person is put in prison for tax avoidance every year in Latvia

Photo: AFI.
Penalties for tax avoidance and money laundering in Latvia have been rather mild until now. It is rare for a person to be put in prison for such crimes. Penalties have often been below the minimal sanction threshold. On average, only a single person is sentenced to prison in such cases, as reported by De Facto.

Only a small number of people noticed who are noticed by Finance Police are put on the accused bench in the end. This institution views approximately 200 criminal processes every year. Each criminal process has one, often several people. Unfortunately, not many criminal cases involving tax avoidance reach a verdict. Finance Police Chief Edijs Ceipe told De Facto that cases are usually complicated, there aren’t many investigators and not all of them have sufficient experience. On top of that, each investigator has to juggle a dozen to up to twenty cases.

De Facto’s data shows that 308 people were tried for tax avoidance in the past seven years (2010-2016). 32 of them were found not guilty.

The number of individuals who got acquittal in money laundering cases is much higher. 63 people were tried in accordance with this section of the Criminal Law in the past seven years. 35 of them were found not guilty.

Riga Regional Court’s Criminal Cases Board chairman Juris Stukāns told De Facto: «The weakest spot, and this is proven by court practice, is lasting investigation and review of cases in court. Once a process reaches a certain length, this condition has to be taken into account when detailing the size of the punishment and, in certain cases, its form. This also partially affects how courts view lasting processes and give mild punishments.»

The punishment for tax avoidance is up to four years in prison. For an organized group, the punishment is up to ten years in prison. The punishment of money laundering is even stricter. Unfortunately, statistics do not prove that – eight people were sentenced to prison for tax avoidance, whereas only four people were put in prison for money laundering, the programme explains.

Even when it is decided to put a person in prison, the sentence does not last longer than three years, De Facto reports.

What were the punishments enforced by courts? In the period of time studied by De Facto, 103 tax avoiders were sentenced to conditional imprisonment, 91 received fines, and 103 people were sentenced to community service. Those tried for money laundering are usually punished with prison sentence (54 out of 63).

Jānis Baumanis, analytical advisor to the Supreme Court’s Criminal Cases Department, says that «the most effective form of punishment is supervised probation, when work is performed with the person’s head. […] It means a person undergoes programmes and the Probation Service works to educate them.»

Four years ago, prison sentences were reduced for a number of crimes. This includes milder punishments for tax avoiders and money launderers. Justice Ministry notes that the goal behind changes was ensuring less prison sentences and more fines, community service and confiscation of property. However, data does not confirm that conditional imprisonment has been replaced by fines.

Justice Ministry’s department director Indra Gratkovska says: «I would not say things have changed considerably. It is in the process of changing. We see a positive tendency forming. We would prefer a more rapid process. But it should be added that those cases are very complicated. It is not possible to investigate them within a year or even two years. The time that is dedicated to those tax cases is considerable. And by the time cases end up in court the situation has changed. It is possible the person originally responsible for cases no longer works on them. Maybe that person is now in charge of other jobs. Conditions can change rapidly.»

Nevertheless, changes commenced this year. It has been noticed that more and more often prosecutors ask for actual prison sentences in tax avoidance and money laundering cases. The reason for that is found in the order issued by the prosecutor general’s office – only in cases if damages caused to the state have been recovered it is possible to ask for a fine or community service. If not, it is necessary to ask for actual prison sentence, said De Facto.

The programme notes that the prosecutor’s office sees a need in a new section of the law that would provide liability for tax fraud.


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