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Legislator amends Penal Code to combat subsidy fraud

| News | Criminal Law

The Official State Gazette of 21st February 2019 publishes Organic Law 1/2019 of 20 February on the reform of the Criminal Code, through which the legislator transposes into our legal system several Community Directives, including number 2017/1371 of 5 July 2017 on the fight against fraud affecting the financial interests of the European Union.

This reform, which will enter into force on 13th March, among other measures, expands the content of the offence of subsidy fraud in article 308 of the Penal Code both qualitatively and quantitatively, in order to, as stated in the explanatory memorandum of Organic Law 1/2019, jointly regulate the offence of national subsidy fraud and the offence of fraud against the General Budgets of the European Union in article 306. Thus, the new regulation broadens the scope of the current offence of subsidy fraud, equating the aid granted by the European Union with that from any national Public Administration, establishing a unitary regulation.

However, despite the anticipated declaration of intent to regulate both crimes jointly, it is surprising that the legislator maintains in force the crime of fraud to the General Budgets of the European Union of Article 306 of the Criminal Code, which does not seem very appropriate, since the coexistence of both criminal figures will raise the possibility of subsuming a possible fraud in both types of criminal, with the consequent bankruptcy problems that will arise. The only plausible explanation would lie in reserving the crime of fraud to the General Budgets of the European Union in order to sanction the fraud perpetrated at the time of the verification of the subsidy in order to retain it unduly, a modality that is not typified in the type of crime in article 308.

On the other hand, the reform blurs the contours of the administrative offence with respect to the criminal offence. Whereas up to now the offence of subsidy fraud established as an objective condition of punishability that the amount defrauded exceeded 120,000 euros, the legislator has reduced this amount in what we can describe as two tranches: fraud from 10,000 to 100,000 euros and fraud exceeding 100,000 euros.

Thus, the offence of subsidy fraud may be committed (regardless of whether the subsidies were granted by a national or European administration) when the amount defrauded exceeds 10,000 euros, a decision which seems somewhat disproportionate considering that (i) until now the threshold of punishability stood at 120,000 euros, as well as (ii) the function of last ratio played by criminal law. However, in order to mitigate the less seriousness of this figure -without degrading the behaviour to a mere minor crime-, the legislator contemplates the imposition of penalties that are not too high in comparison with those that punish fraud for amounts greater than 100,000 euros, penalties that, at the time, coincide with those that so far sanction the current crime of subsidy fraud and the crime of fraud to the General Budgets of the European Union.

Precisely this last crime with which the new illicit subsidy fraud will coexist, also establishes two tranches: fraud from 4,000 to 50,000 euros and fraud over 50,000 euros, which will surely cause problems when subsuming a possible fraud of aid granted by the European Union in one or another criminal type, especially in view of the fact that the thresholds of punishability of the new crime are more favourable to the defendant.

The reform also modifies the criterion for calculating the amount defrauded, for which, from 13 March, the total amount obtained, defrauded or unduly applied during a calendar year will have to be taken into consideration, regardless of whether it comes from one or several Public Administrations, since regardless of who was the granting Administration, the Spanish Treasury will always be harmed. It goes without saying that the reform does not make it clear whether, in order to determine the amount defrauded, subsidies from both the national and European administrations can be considered together, or whether, on the contrary, they will have been carried out separately.

In any event, this new calculation method will make it easier to reach the thresholds of eligibility, and contrasts with the current calculation formula, which requires aid or subsidies obtained during a calendar year to relate to the same eligible private activity and prevents several subsidies from being considered together if they relate to different eligible activities. Furthermore, this methodology is consistent with the formula for calculating the defrauded tax liability for a tax offence, in which the tax is calculated on the basis of each tax defrauded during a tax period, without adding the contributions of several of them to reach the threshold of punishability, despite the fact that the Treasury will always be harmed, regardless of the tax defrauded.

In short, Organic Law 1/2019, reforming the Criminal Code, modifies, among others, the crime of subsidy fraud, extending its scope to expressly classify the fraud of aid granted by the European Union, and reducing the amount of the objective condition of punishability of the crime to an extremely small figure (10,000 euros) compared with the amounts that to date the legislator has established (120,000 euros). And as if this were not enough, the crime of fraud against the Budgets of the European Union remains in force, which will surely result in important interpretative gaps.

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