{"id":242379,"date":"2019-12-27T18:15:00","date_gmt":"2019-12-27T17:15:00","guid":{"rendered":"https:\/\/highgate.sk\/did-andrej-kiska-really-commit-a-crime-as-the-managing-director-of-ktag-tax-legal-analysis\/"},"modified":"2024-11-21T20:33:52","modified_gmt":"2024-11-21T19:33:52","slug":"did-andrej-kiska-really-commit-a-crime-as-the-managing-director-of-ktag-tax-legal-analysis","status":"publish","type":"post","link":"https:\/\/highgate.sk\/en\/did-andrej-kiska-really-commit-a-crime-as-the-managing-director-of-ktag-tax-legal-analysis\/","title":{"rendered":"Did Andrej Kiska really commit a crime as the managing director of KTAG? Tax – legal analysis"},"content":{"rendered":"\n

Determining whether a particular tax optimisation is legal or can be sanctioned as an administrative offence or even as a criminal offence is not easy.<\/em><\/p>\n\n

Mato is “employed” full time in the company as a freelancer.\nHe works exclusively in the premises of this company, on the basis of instructions from the managing director of this company, he uses a computer, printer, utensils,… He participates in company team-building, has relatively fixed working hours and is entitled to 25 days of paid vacation.\nWhile at home and among his colleagues Mato calls the managing director of this firm his boss, on Mato’s invoice this boss acts as a client.\nIs this OK (tax optimisation)?\nOr is it fine (aggressive tax optimization)?\nOr is it even a criminal offence (tax and insurance fraud)? <\/strong><\/p>\n\n

At first glance, these questions seem completely irrelevant.\nAfter all, so many companies and freelancers in Slovakia do it this way.\nEven the journalist who asked me about the moral side of the Panama Papers.\nHowever, the Labour Code orders Mata to carry out such activities in an employment relationship.\nHowever, since employment means a lot of taxes and even more levies, after a miscalculation, Mato and the managing director of this company agree that Mato will invoice the company through his newly established trade.\nSo the agreement between Mato and his boss (the client) is – \u20ac2,000 gross salary will be exchanged for \u20ac2,000 on the invoice.\nThe company will save EUR 700 per month and Mato will be able to net almost EUR 400 more.\nAnd if he thinks about it, he can get the maximum maternity allowance even with this setup. Win-win<\/strong>. <\/p>\n\n

Simplifying, the law commands Mata to enter into an employment-only relationship with the company.\nThe modality of this legal norm allows us to subject it to conversion without affecting its meaning.\nThus, in other words, the law prohibits Mato from entering into a commercial contract with the firm.<\/strong> However, in order to pay less in taxes and levies, Mato and the firm choose not to respect the law.\nIn this regard, the Criminal Law states: “Whoever shortchanges tax, social insurance contributions, public health insurance contributions<\/strong> or contributions to old-age pension savings to a small extent shall be punished by imprisonment for one to five years<\/em>.” <\/p>\n\n

The comparison with classic VAT fraud is interesting.\nIn these cases, the VAT Act states that the entrepreneur cannot claim a VAT deduction if, among other things\/examples, there has been no actual supply of goods or services.\nHowever, well-known players in major VAT scandals with fictitious supplies have claimed VAT deductions (and thus, for example, paid less in taxes, just like Mato), even though the law forbids them to do so (just as Mato is forbidden by law to enter into a commercial contract).\nTaking into account only the fulfilment of the formal elements of the specific offence and abstracting from the material aspect (i.e. the degree of seriousness – the ultima ratio<\/em> principle), are Mato’s actions and those of the company’s managing director in order (tax optimisation)?\nIf it is not okay, do they face only a fine for such conduct (aggressive tax optimization) or does it really fulfill the objective aspect of the crime (tax and insurance premium evasion)? <\/strong><\/p>\n\n

This is not a binary world<\/h3>\n\n

If you’ve thought about this question more deeply, you’ve probably figured out that this is not a binary world.\nDenis Healey, former UK Chancellor of the Exchequer, likened the difference between aggressive tax optimisation (a penalty) and tax short-cutting (a criminal sanction) to the thickness of a prison wall<\/strong>.\nWhile this statement does nothing to help identify what is, what is not, or how much is not allowed, it completes the picture for the layman of the fragility of firm foundations on this subject.\nI always help myself in explaining it with this image: <\/p>\n

\n
\"\"<\/figure>\n<\/div>\n

Adjacent sets do not have only one join point intentionally.\nThis is because in practice there are frequent cases where it is simply not possible to reliably assign a business situation to a particular set.\nIn particular, cases where it is not clear whether the tax offence in question also fulfils the elements of a criminal offence represent a very unpleasant area of legal uncertainty.\nYet the difference between a written notice from the tax administrator and a nightly battering ram from the NAKA is experientially quite significant. <\/p>\n\n

It is not easy to classify substantively whether a particular tax optimisation is legal <\/strong>or can be sanctioned as an administrative offence or even as a criminal offence.\nThis is not a question for an accountant.\nThe accountant will correctly book Mato’s invoice because it meets the requirements of an accounting document.\nNor is it a question for the tax adviser.\nThe latter, in turn, has the task of correctly calculating which form of cooperation (employment relationship vs. commercial contract) is more advantageous for both parties in excel.\nAnd it is not even a question for the criminal lawyer.\n“That would put everyone in jail” was the practical answer from one respected criminal lawyer. <\/p>\n\n

Based on my experience, I am convinced that only a lawyer who has a detailed knowledge of taxes, is familiar with the basics of accounting, and has some knowledge of legal theory and constitutional law can competently classify economic situations into particular sets.\nLast but not least, he must also have business experience. The life of an entrepreneur is not black and white, and without this knowledge a lawyer cannot grasp this issue in all its complexity.<\/strong><\/p>\n\n

KTAG and the presidential campaign<\/h3>\n\n

I only know about the KTAG case from the media.\nIt is subject to tax secrecy :).\nHowever, based on information from Andrej Kiska’s background and media information, I understand that: <\/p>\n\n