Fraud (‘Dolo’) in Tax Evasion

What is ‘Dolo’ in tax evasion?

‘Dolo’, in the context of tax evasion, refers to the deliberate and conscious intention to commit an illegal action with the aim of tax evasion.  But it also encompasses the behaviour consisting of the deliberate ignorance of not wanting to know what can and should be known. 

In legal terms, ‘dolo’ implies the will and knowledge to carry out acts that constitute a tax violation, whether directly or indirectly.

What constitutes tax evasion?

Tax evasion, a type of ‘artificial’ crime devised by today’s legislators—such as computer crime or environmental crime—constitutes, according to most modern criminal law doctrines:

• the theory of "criminal policy" by ROXIN: crimes are those decided by the legislator at any given time, in accordance with the actual government’s criminal policy; and
  
• the "punitive populism": it is necessary to regulate, in the best possible detailed manner and with increasing severe penalties, the most reproachable offenses.

Hence, it is important to consider the specific regulation of the offense, i.e., the objective elements of the conduct and the subjective element, i.e. the perpetrator’s culpability required.

What is the criminal conduct?

Tax evasion is committed, as established in Article 305 of the Spanish Penal Code, when there is a tax debt exceeding 120,000 euros, because of a fraudulent conduct by the taxpayer. This debt can arise through three possible criminal behaviours:

1. evading tax payment;
2. obtaining undue refunds; or
3. enjoying undue tax benefits.

What are the essential elements of tax evasion?

The essential elements of tax evasion, without which it does not exist, are as follows:

1. the unpaid amount, which must exceed €120,000 as the base debt, i.e. without adding other concepts such as interest or penalties, among others, to reach that amount; and
2. that this is the result of fraudulent conduct, which excludes negligence, and only penalizing it as a crime if there is a ‘dolo’.

What is the ‘dolo’?

In order to hold someone responsible for a criminal act, where there must be ‘dolo’, there must be knowledge and willingness to carry out the conduct classified as a crime.

What types of ‘dolo’ exist?

The crime can be committed through the following types of ‘dolo’:

1. direct ‘dolo’: committed with the intention of having a criminal result, and knowing what one is doing;
2. indirect ‘dolo’: with the necessary consequences, accepted by the perpetrator; and
3. eventual ‘dolo’: when the subject envisages the criminal result as probable, and although he/she does not directly desire it, he/she does not care if it happens as he/she does not do anything to prevent it.

When does ‘dolo’ exist in tax evasion?

As it is a deliberate crime—as stated by STS 951/2023, of 21 December 2023—the sentence requires proving, "beyond all reasonable doubt," the intention not to pay the amounts due, and this must be justified via a logic, reasonable, and specific motivated reasoning in the judicial decision.

Cases of "’dolo’ in tax evasion," in addition to "direct ‘dolo’,” "eventual ‘dolo’," in which there is deliberate ignorance of not wanting to know what can and should be known, but it is necessary to prove it to conclude that there was indifference in relation to the represented criminal result, without merely presuming it (STS 726/2020, of 11 March 2021).

In cases of continued offense, the "unitary ‘dolo’" doctrine may be defended,  allowing for the sanctioning the overall conduct, rather than exercise by exercise.

Who are those responsible for the tax evasion?

Regarding authorship and participation, the active subject of the offense may be a natural person or, according to Art. 310 bis, a legal entity, but in both cases, it is the one obligated to pay the tax and who fails to do so.

The ‘extraneus’, that is, one who is not the due taxpayer, is liable if he/she acts as a collaborator. It could be someone who helps the taxpayer evade tax payment.

The advisor may be considered a necessary collaborator in the tax evasion if he/she is the one who devises a fraudulent plan or executes the taxpayer's desire to pay less taxes than those due, although with the possibility of receiving a lesser penalty than the taxpayer.

What are the fraudulent behaviours of tax evasion?

The most typical fraudulent behaviours of tax evasion include:

• creating fake invoices to reduce the tax liability;
• justifying economic transactions through simulated contracts;
• availing oneself of inapplicable deductions; and
• concealing the reality on which the tax obligation is based or originates.

Which behaviors would not constitute tax evasion?

Behaviors that, among others, would not constitute tax evasion include:

• the legal discrepancy of the accused, provided it is reasonable; and
• the "option economy" or election of the most beneficial mode, tax-wise, for the taxpayer, if it is legal and feasible.

Conclusion

We can conclude the following:

• debt is not fraud,
• tax evasion requires proof that the tax debt has a fraudulent origin, so if this is not proven, there is no such crime, and
• the burden of proving the commission of tax evasion lies with the prosecution: STS 917/2021, of 24 November, not admitting presumptions against the accused. In case of doubt, the principle of in dubio pro reo requires acquittal.  

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