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Criminal proceedings on tax evasion in 2018 – what was year-end closing?

26 March, 2019 Newsletters

For a number of years now, the criminal proceedings on tax evasion has been constant companions of tax audits of business, as demonstrated both by the official statistics of General Prosecutor’s Office1 and according to our observations (see infoletters “White collar” crimes in connection with taxes”, “Criminal proceedings on tax evasion: summary statistics for 2017”, “Criminal proceedings on tax evasion: statistics and verdicts within first half of 2018” and others).

As we raised in infoletter “White collar” crimes in connection with taxes”, according to statistics data there were registered 1 688 criminal proceedings on tax evasion in 2018. Such index is bigger than the index of registered criminal proceedings on tax evasion in 2017 by 27 %:

Given such number of registered criminal proceedings only 39 of them were transferred to court for court consideration, which in percentage correlation does not exceed 2,4 %.

Such indexes demonstrate that criminal proceedings under art. 212 of Criminal code of Ukraine (hereinafter referred to as “CC of Ukraine”) remain most likely the method of pressure and harassment of tax payers like it was earlier, that actual mechanism of prosecution for tax evasion. Besides, such correlation accentuates that effective version of art. 212 of CC of Ukraine has issues with quality, that might, inter alia, confirm the fact of its unconstitutionality (see infoletter “The importance of being consistent”).

Subsequent to the results of court consideration of criminal proceedings the number of approved tax evasion is even less. Thus, according to Unified state register of court decisions, 23 verdicts were delivered in 2018, in particular, 14 judgements of conviction, 8 of which were based on plea agreements, and 9 verdicts of no guilty. Such number in general and on each individual category is 57,4 % less then in 2017. It can be discernible on graphs below:

In general, as well as it was earlier, the main array of cases on tax evasion, considered in court is related to so called “fictitious sale operation”, where the subsumption of relevant situations is increasingly made with concurrent elements of crime, including art. 358 and art. 366 of CC of Ukraine. So that, the subsumption under concurrent articles was made in 5 of 12 court decisions in criminal proceedings on tax evasion.

Detailed description of all decision in 2018 is attached in Annex hereof.

We invite to fix on the analysis of the most interesting court decisions, delivered within last quarter of 2018.

So that in case No. 361/2189/15-к2 regarding the director of an enterprise, who was accused in tax evasion and concurrent forgery, concluded by documentational conduction of fictitious deeds, the court delivered a verdict of not guilty. The court brought attention to the fact, that the enterprise appealed the conclusions of act of audit (which was the basis of accusation) and the deeds were not adjudicated as fictitious.

Besides, the Court stated aside, that the essentials of criminal responsibility lies in the fact, that it occurs not as a result of the fact of non-payment of taxes and other obligatory fees but as a result of evasion from fulfillment of abovementioned obligation.

Another non-guilty verdict in case No. 325/22/14-к3 is also worth noticing, where the court stated, that agreements were not adjudicated in a judicial proceeding as void (fictitious). Accordingly, the conclusions of act of audit on fictitiousness of such agreements were not taken into consideration by the court. The court also considered the results of consideration of administrative dispute on appeal of tax assessment and consequently the fact of its cancelation.

It should be noted at long last, that in general both the outcome and efficiency of criminal proceedings on tax evasion remains on the low level. So that, the overall amount of tax evasion, considered in courts is 51 381 323, 27 UAH4 provided that only 8 462 372 UAH amounting only 16,46 % from total amount of evasion were adjudged to reimbursement.

As far as we can see, the statistics of criminal proceedings on tax evasion confirms the reasonability of revision of current version of art. 212 of CC of Ukraine and procedures of work of bodies of pre-trial investigation.

The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.

Notes:

1According to official statistics of General Prosecutor’s Office of Ukraine.

2Available in USRCD by reference.

3Available in USRCD by reference.

4Exclusive of evasion, adjudicated by courts in 2017 in case on unlawful use of the customs processing regime – see our infoletter “Criminal proceedings on tax evasion: summary statistics for 2017”.

Kind regards,

© WTS Consulting LLC, 2019

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