Abstract
This paper deals with Slovenian special tax on undeclared income and attempts to determine its legal nature by presenting and analysing the regulation. The author believes that this public levy is actually not a tax since it lacks the financial purpose that each tax should have, according to the jurisprudence of the Slovenian Constitutional Court. Since the rate at which the special tax on undeclared income is levied exceeds the tax rates applied on declared income, and therefore the taxpayer’s burden is higher, the author claims that the discussed tax is actually a mixture of compensation for the lost tax revenue and a legal sanction, with both deterrent and retributive (punitive) purpose, which is imposed on the taxpayer for not declaring the income.
Highlights
Countries all around the world are constantly fighting tax avoidance in order to minimize their tax gap, using different measures
Since the rate at which the special tax on undeclared income is levied exceeds the tax rates applied on declared income, and the taxpayer’s burden is higher, the author claims that the discussed tax is a mixture of compensation for the lost tax revenue and a legal sanction, with both deterrent and retributive purpose, which is imposed on the taxpayer for not declaring the income
By assessment of tax on undeclared income none of these circumstances is identified, since the only criterion is the amount of allegedly undeclared income. This analysis shows that tax on undeclared income according Article 68.a of the TPA is not really a tax, but partly compensation for the lost income tax revenue, partly a sanction with a deterrent and retributive purpose
Summary
Countries all around the world are constantly fighting tax avoidance in order to minimize their tax gap, using different measures. It is an ongoing battle between the taxpayers and the governments. Sometimes the latter (perhaps out of despair, due to lack of self-efficacy) introduce unorthodox legal measures. One such measure is a special tax on undeclared income, according to Article 68.a of the Slovenian Tax Procedure Act (hereinafter: TPA). The conclusion contains the most important findings and possible legal consequences if the author’s view is correct
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