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Enactment of the new law on the reinforcement of the fight against fraud (“loi relative à la lutte contre la fraude”)

 

22 October 2018

After much parliamentary debate, the law on reinforcement of the fight against fraud has finally been enacted.

Amongst its provisions, the new legislation will introduce a number of significant changes as regards the prosecution of tax evasion offences, including:

The possibility to settle the tax proceedings with the French Tax Authorities’ (“FTA”) even when criminal proceedings on grounds of tax evasion have been initiated or are considered. 

Article L. 247 of the French Tax Procedure Code prevents the FTA from settling once criminal proceedings have been initiated or considered. The proposed legislation amends this provision so as to allow an administrative settlement, notwithstanding pending criminal proceedings. A debate nonetheless remains as to whether the law will now allow a settlement with the FTA regarding only the amount of the penalty to be imposed, or also in respect of the amount of tax avoided. 

The extension of the scope of the French style DPA (CJIP) and guilty plea agreement (Comparution sur Reconnaissance préalable de Culpabilité (“CRPC”)) to settle tax evasion investigations. 

At present, neither French criminal settlement mechanisms, namely the CJIP (no admission of guilt required) or the CRPC (admission of guilt required) are open to individuals and legal entities prosecuted on the ground of tax evasion. Post implementation of the  new legislation, the Public Prosecutor will have the ability to enter into a CJIP (with corporates only) and a CRPC (with both individuals and corporates) to settle prosecutions for tax evasion. 

The possibility to prosecute tax evasion offences absent any prior complaint from the FTA.

French law requires that a criminal complaint be filed by the FTA before the Public Prosecutor can investigate any tax evasion offence. This mechanism provided by Article L. 228 of the French Tax Procedure Code, also known as the so-called “verrou de Bercy”, has been highly criticised insofar as it prevents the Public Prosecutor from investigating tax-related matters where the FTA has chosen not to file a prior complaint. 

The new legislation will significantly limit the application of “verrou de Bercy”. It now imposes an obligation on the FTA to disclose any serious breach (e.g. those that led to administrative penalties of 40% and more) it becomes aware of to the Public Prosecutor who may, in turn, decide whether or not to prosecute. The legislation will also allow the Public Prosecutor to prosecute tax evasion cases of its own volition that are connected to cases he or she is already in charge of.

The majority of the new legislation will enter into force immediately. Its potential to significantly smooth the prosecution and settlement of tax evasion cases is to be welcomed.

Further information
This article is part of the European White Collar Crime Report, a quarterly publication.​
 

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