IVO CARACCIOLI
Professor of Criminal Law at the University of Torino (Italy)
President of the "Centro di diritto penale tributario" (Centre for Criminal Tax Law) (Italy)
TAX FRAUD : COOPERATION BETWEEN POLICE AND COURTS IN ITALY
1.- In Italy, based on the provisions of the 1948 Constitution, the Pubblico Ministero, or Public Prosecutor, who is the investigative authority in criminal matters, is part of the court system, also known as the judiciary, and thus, unlike other systems, is not part of a different branch separate from the judiciary branch that decides cases.
For some time there has been a lively political debate in Italy on the issue referred to as "career separation," which attorneys support but judges and the current Italian government oppose, as they fear that a Public Prosecutor who is not integrated into the judiciary may be more susceptible to political pressure.
Recent laws have introduced only a few modest rules to limit the transition from one career to another, but the principle of non-separation of careers has remained intact.
It is necessary to keep these general principles in mind in order to understand the role that the Public Prosecutor plays within Italian criminal procedure.
2.- Based on the Constitution, the Public Prosecutor is the head of the criminal police, and thus he must coordinate all police investigations during criminal investigations. Obviously, this is also true for offences that regard EU fraud and tax evasion.
Again according to the Constitution, the Italian procedural system is characterized by the principle of "mandatory prosecution," and thus when the Public Prosecutor for any reason becomes aware of a fact that constitutes a crime (based on a police report, direct knowledge, or in another way), he is always obligated to file a criminal prosecution, and then, with the help of the criminal police, to conduct all relevant investigations.
At the end of so-called preliminary investigations, which have a fixed time limit, depending on the gravity of the crime, the Public Prosecutor must so advise the party under investigation, who has twenty days to ask to be questioned or to present briefs and produce evidence.
If the Public Prosecutor considers the information on the crime to be unfounded, he asks the examining Judge to issue an order to close the case. Otherwise, he requests an indictment, and there will then be a hearing before the preliminary hearing Judge, who may decide not to proceed (if sufficient grounds for the action do not exist) or to indict the defendant.
In the latter case, the defendant will be judged by the Court, unless he opts for a "special proceeding" (which involves a type of plea bargain procedure and simplified, shortened proceedings before the same preliminary hearing judge).
The Court's judgements may be appealed before the Court of Appeal and, on points of law only, at a higher appellate level before the Court of Cassation.
3.- If EU fraud is involved, the investigations of the criminal police may be performed by any of the following:
- the State Police (non-military police)
- the Carabinieri (military police)
- the Guardia di Finanza, or Tax Police (a military body which is essentially responsible for tax matters, but which also performs important functions in many other sectors)
All report to the Public Prosecutor and conduct investigations under his direction.
4.- If tax offences are involved (regarding income tax, VAT, or contraband), the investigations may be conducted by any of the following:
- the Tax Police
- the Agenzia delle Entrate, or Revenues Agency (a civil office of the Tax Authority, which has the same investigative powers as the Tax Police, but as it is not part of the military, its powers are less incisive)
This duality of competent organs in tax matters (one military, the other civil) is a peculiarity of the Italian system, which in this respect is profoundly different from other EU countries, which have only a civil Tax Authority and not a military one. This duality, which sometimes creates disputes and misunderstandings between the two bodies, has deep historical roots and thus is not likely to be eliminated.
5.- In the case of fraud against EU financial interests, OLAF may take action. The Italian investigating authorities must cooperate with OLAF, although their obligations and practical investigations in the field continue based on a division of responsibilities between OLAF and national police forces.
6.- As set forth in the Italian Criminal Code, EU fraud is essentially "aggravated swindling in order to obtain disbursements of public funds" (Art. 640 bis of the Criminal Code), “misappropriation to the detriment of the State” (Art. 316 bis Criminal Code), “unlawful collection of disbursements to the detriment of the State” (Art. 316 ter Criminal Code), and “embezzlement, extortion, bribery and incitement to corruption of members of European Communities and officials of European Communities and foreign States” (Art. 322 bis Criminal Code).
The investigation of these crimes requires complex inquiries, and thus the Public Prosecutor normally uses a technical consultant who is an expert in the field for the necessary technical findings and reconstructions.
Tax offences - for which technical advice is also important - are contained in Legislative Decree 74 of March 10, 2000, with several later supplements, which addresses only income tax and value added tax. For contraband (customs offences), an old 1973 consolidation law governs.
7.- It should be kept in mind that one of the fundamental characteristics of the new Italian procedure introduced with the new 1988 code of criminal procedure is that evidence must be developed in the proceedings through the adversarial process.
Therefore, not all documents collected during the preliminary investigation are passed on to the trial court, but rather, with few exceptions, only records of investigative acts that cannot be repeated.
The above creates operating difficulties in reconstructing tax offences, which are based on technical and accounting factors.
As a result, the Revenues Agency official or Tax Police officer who performed the examinations and inquiries must be heard before the Court. As he cannot recall figures and technical profiles by memory, he is authorized to consult the records.
An important point is that witnesses are not allowed to express opinions, as they must refer solely to the facts. So, in the tax area, reconstructions of criminal tax violations must almost always make use of evaluative profiles (for example, what is considered to be an excessive write-down of assets in financial statements that influence the income tax statement), and thus when the tax official is testifying, the prosecution and the defence will necessarily dispute whether or not given questions are admissible.
8.- As an overall opinion on relationships between the police and courts in collecting and evaluating evidence in the criminal cases considered here, we may conclude that cooperation is generally good, but the following problems do exist:
- Public prosecutors and judges do not always have adequate knowledge of tax matters, which are unfortunately neglected in the universities and are not a mandatory subject in the examination required to become a judge.
- The existence of two branches of the Tax Authority (one civil and the other military) creates rivalry and conflict between them.
- Italian tax laws are constantly changing and are too complex, and thus taxpayers are not always clear on what they are supposed to do.
- EU fraud is unfortunately quite common, and because of political complicity, sufficient action is not always taken against serious offences.