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Criminal proceedings on tax evasion: statistics and verdicts within first half of 2018

17 August, 2018 Newsletters

Pretty high activity rates of tax and customs authorities, as well as law enforcement agency represented by “ghost” of tax police, have been recorded in the first quarter of this year and continue to be observed during the second quarter.

According to the official statistical data published on the official website of General Prosecutor Office of Ukraine, the rate of opened criminal proceedings for the first half of this year is 17,5 % higher than for the similar period of the previous year and constitutes almost 78 % of the annual rate of criminal proceedings for 2017.

Therefore, comparing with the first quarter of this year, the second quarter is notable for 220 initiated criminal proceedings, which is twice law rate (contrary to 433 for the first quarter). However, such fluctuations are rather seasonal and are also related to the vacation period, rather than to decrease in fiscal pressure that has been observed for several years.

The situation is slightly better in terms of dynamics of the closure of criminal proceedings. Thus, 47 criminal proceedings for tax evasion were closed for the second quarter of 2018 (totally 56 for the half year). Comparing with the similar period its number has increased by almost 27 %.

Therefore, a significant increase in the number of notifications on suspicion is observed. Thus, 75 notifications on suspicion were delivered for the first half year (against 47 notifications in the similar period in 2017). However, we leave open the possibility that mentioned increase is only an attempt to improve the statistical data, since in practice taxpayers have still high chances to appeal such notifications on suspicion (it bears reminding that due to the fact, that the Law of Ukraine “On amending the Commercial Procedure Code of Ukraine, the Civil Procedure Code of Ukraine, The Code of Administrative Proceedings of Ukraine and other legislative acts” No. 2147- VIII has entered into legal force on October 03, 2017, it has become possible to appeal notifications on suspicion to the courts).

As for approaches for consideration of cases, we suggest analyzing verdicts delivered during this quarter. According to the data available in the Unified State Register of Court Decisions in the first quarter of 2018 there were delivered only 6 verdicts in cases related to tax evasion, in particular: 1 acquittal, 2 guilty verdicts and 3 verdicts based on plea agreements.

As one can see, the amount of acquittals has significantly decreased in the second quarter. We hope, that such a decrease is caused by the fact, that now criminal proceedings are being initiated based on reasonable and substantiated grounds, but not due to changes in approaches of the Court regarding consideration of such cases.

Based on the analysis of verdicts for the first half of the current year, the certain difference in approaches to the determination of acts under Article 212 of the Criminal code of Ukraine is discernible.

Thus, in the second quarter of 2018 while considering the case No. 361/2918/181 with respect to the group of persons, that rendered conversion “services” using sham companies, the court concluded, that sham business shall be determined not only under Article 205 of the Criminal code of Ukraine, but also shall be considered as aiding and abetting in tax evasion.

In another verdict in case No. 361/2918/182 the court determined actions of persons acting in collusion in respect of registration of numerous sham companies for the purposes of VAT credit formation by the enterprise of real sector of economy, as completed tax evasion attempt, having noticed, that registration of some VAT invoices has been stopped and enterprises-purchasers have submitted adjustment calculation regarding their VAT credit formation.

We commend a detailed description of all court decisions to Your attention in Annex.

As one can see, the results of the first half year show that this year the activity in terms of criminal proceedings on tax evasion will be higher than in the previous year.

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.


1The verdict of Brovarskyi district court of Kyiv region in case No. 361/2918/18 as of June 04, 2018 is available by the link.

2The verdict of Kriukivskyi district court of the city of Kremenchuk of Poltava region in case No. 537/413/18 as of February 08, 2018 is available by the link.

Kind regards,

© WTS Consulting LLC, 2018

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