Pre-investigation on the tax evasion (Art. 212 of the Criminal Code of Ukraine): is it now only about the deputies and the authorities?

21 August, 2017 Newsletters

As known, the Law of Ukraine “On Amendments to the Tax Code of Ukraine on Improving the Investment Climate of Ukraine” as of January 21, 2016 No. 1797-VIII came into effect on January 1, 2017, Section XVIII-2 “Tax Militia” of the Tax Code of Ukraine (hereinafter – “the TC of Ukraine”) was excluded. Investigators of the tax militia were deprived of any authorities, including, respectively, the authorities to conduct pre-trial investigation.

In more details, this issue was examined in the newsletter “What is to be done with “ghosts” (or if the financial investigations department as a part of the tax authority is addressing you now)”.

A positive judicial practice managed to be formed on this issue, when the investigating judges in the rulings point out the lack of powers of investigators of the tax militia, including the right to address petitions to the investigating judge (more in the analytical paper “Tax police: courts finally determining the absence of authority”).

Until January 1, 2017, the tax militia itself, in accordance with the TC of Ukraine (in edition effective before January 1, 2017), was the investigation body of controlling authorities that supervise compliance with the tax legislation and in accordance with the provisions of para. 3 of part 1 of Article 38, part 3 of Article 216 of the Criminal Procedure Code of Ukraine (hereinafter – “the CPC of Ukraine”) had the power to conduct pre-trial investigation of crimes provided among others by Article 212 of the Criminal Code of Ukraine (hereinafter – “the CC of Ukraine”). However, there are no such powers of the tax militia at the moment.

Due to the facts mentioned above, the question arises: who has the authorities to conduct a pre-trial investigation in criminal proceedings based on Article 212 of the CC of Ukraine for tax evasion now?

The investigative jurisdiction of criminal proceedings is determined by part 3 of Article 216 of the CPC of Ukraine, which stipulates that:

“Investigation bodies of controlling authorities that supervise compliance with the tax legislation, conduct pre-trial investigation of crimes stipulated by Articles 204, 205, 205-1, 212, 212-1, 216, 218-1, 219 of the CC of Ukraine”.

However, at present, there are no investigators of controlling authorities that supervise compliance with the tax legislation provided by the law. Accordingly, is it follows now there are no investigating authorities having the right to conduct pre-trial investigation in cases enlisted into the Unified State Register of Pre-trial Investigations (hereinafter – “the USRPI”) under Article 212 of the CC of Ukraine?

At the same time, the prosecutor also does not have such authorities. In particular, according to para. 4 of part 2 of Article 36 of the CPC of Ukraine, the prosecutor has the right, when necessary, to conduct investigative and procedural actions personally. In other words, the prosecutor may conduct certain investigative or procedural actions within certain criminal proceedings, in certain cases; however, the prosecutor has no authorities to carry out the whole complex of investigative actions.

Conducting the pre-trial investigation itself is not within the competence of the prosecutor. And besides, it would be contrary to the general principles, because according to part 2 of Article 36 of the CPC of Ukraine, the prosecutor supervises compliance with the laws during the pre-trial investigation; he is granted with the appropriate authorities for these purposes. In case of combination of investigation and supervision over it – “two in one” or “I supervise myself” – this function fades. The direct conduction of pre-trial investigation by the Prosecutor’s office is contrary to the provisions of Article 131-1 of the Constitution of Ukraine (amended due to the Constitutional reform of the last year), according to which only the following is attributed to the activity of the Prosecutor’s office:

“Article 131-1. The Prosecutor’s office operates in Ukraine and conducts the following:

1) public prosecution in court;

2) organization and procedural guidance of pre-trial investigation, resolution of other issues during the criminal proceedings in accordance with the law, supervision over covert and other investigation actions of the law-enforcement agencies;

3) representation of the state interests in court in exceptional cases and in the procedure prescribed by the law.

…. “.

A separate issue is the possibility of determination of other pre-trial investigation body than directly established by the CPC of Ukraine. This issue arises in view of part 5 of Article 36 of the CPC of Ukraine:

In case of ineffective pre-trial investigation, the Prosecutor-General, head of regional prosecutor’s office, their deputies shall have the right, upon their own motivated resolutions, to assign the conduct of pre-trial investigation of any criminal offense to another pre-trial investigation body including a higher-level investigation body within the same authority”.

Under this provision, the transfer of pre-trial investigation is an extraordinary procedural action, an exception that is possible only in case of ineffective pre-trial investigation. At the same time, the prosecutor must prove such ineffectiveness by motivating the relevant resolution.

In its turn, in criminal proceedings regarding tax evasion, there is currently no pre-trial investigation authorities empowered to conduct such proceedings by the law. Accordingly, it is impossible to prove the ineffectiveness of pre-trial investigation conducted by authority that does not exist or authority that is not authorized at all to conduct pre-trial investigations (tax militia).

However, we do not exclude the attempts of such “reshuffle” by the prosecutor’s offices, which are unlikely to be motivated, and, accordingly, lawful. Therefore, the transfer of pre-trial investigation to other authorities raises the question of legality/admissibility of such action and of the evidence obtained in this way.

Taking into account the foregoing, currently there is no general investigation authority that would have the authorities to conduct a pre-trial investigation of criminal proceedings under Article 212 of the CC of Ukraine.

However, there is a very interesting exception to this rule.

In particular, para. 1 of Section XI “TRANSITIONAL PROVISIONS” of the CPC of Ukraine stipulates that:

Before the day of entry into force of provisions of part 4 of Article 216 of this Code, authorities regarding pre-trial investigation of the criminal offences specified in part 4 of Article 216 shall be exercised by investigators of prosecutor’s offices, which enjoy the powers of the investigators as established by this Code”.

In its turn, according to para. 1 of part 4 of Article 216 of the CPC of Ukraine:

“4. Investigators of the units of State Bureau of Investigations conduct pre-trial investigation of crimes:

1) committed by the President of Ukraine, whose authorities were terminated; the Prime Minister of Ukraine, member of the Cabinet of Ministers of Ukraine, first deputy and Deputy Minister; member of the National Council of Ukraine on Television and Radio Broadcasting, the National Commission for State Regulation of Financial Services Markets, the National Securities and Stock Market Commission, the Antimonopoly Committee of Ukraine, the Head of the State Committee for Television and Radio Broadcasting of Ukraine, the Head of the State Property Fund of Ukraine, his first deputy and deputy; member of the Central Election Commission; people’s deputy of Ukraine; the Commissioner of the Verkhovna Rada of Ukraine on human rights; Director of the National Anti-Corruption Bureau of Ukraine, the Prosecutor General, his first deputy and deputy; Head of the National Bank of Ukraine, his first deputy and deputy; secretary of the National Security and Defense Council of Ukraine, his first deputy and deputy, the Permanent Representative of the President of Ukraine in the Autonomous Republic of Crimea, his first deputy and deputy, assistant or advisor of the President of Ukraine, Head of Verkhovna Rada of Ukraine, Prime Minister of Ukraine; judge, law enforcement officer; the state officer of “A” category, except cases when pre-trial investigation of these crimes attributed to the investigative jurisdiction of the National Anti-Corruption Bureau of Ukraine in accordance with part 5 of this article … “.

Thus, the pre-trial investigation of crimes committed by authorities, according to the current legislation, should be conducted by the investigation units of the Prosecutor’s office.

Accordingly, in criminal proceedings on tax evasion committed by deputies/judges/ministers etc., initiated under Article 212 of the CC of Ukraine, the body authorized by law to conduct a pre-trial investigation is the Prosecutor’s office.

Perhaps that’s why criminal proceedings against people’s deputies under Article 212 of the CC of Ukraine hit such a stride in 2017 (more in the article “E-declaration – the way to criminal case?”).

It’s interesting that such jurisdiction could have been questioned at least since September 30, 2016 – the date when the relevant amendments to the Constitution of Ukraine and in particular the above-mentioned Article 131-1 became effective. The Article does not stipulate the right of Prosecutor’s office (and hence any bodies, units or officers in its structure) to conduct pre-trial investigation. Thus, since September 30, 2016 one may talk of the unconstitutionality of the abovementioned transitional provision and therefore, the illegality of pre-trial investigation conducted in this way and its results. We remind that from September 30, 2016 it is possible to protect oneself from formally legal actions which contradict with the Constitution of Ukraine by a constitutional complaint of a person to the Constitutional Court of Ukraine as well.

However, this issue was addressed during the Constitutional reform the last year by the introduction of para. 9 of the Transitional Provisions of the Constitution of Ukraine as follows:

“9. The Prosecutor’s office shall, in accordance with effective laws, continue to perform the function of pre-trial investigation, until the state bodies authorized by the law perform such function begin to operate as well as the function of supervising compliance with the laws in the execution of court decisions in criminal cases and in the application of other enforcement measures related to the restriction of personal freedom of citizens begin to operate, before entry into force of the law on creation of a double system of regular penitentiary inspections”.

Therefore, it can be concluded that the function of pre-trial investigation, in particular, of tax evasion (Article 212 of the CC of Ukraine), nowadays is determined only regarding deputies, certain categories of state officers and other authorities.

So, it can be said that Article 212 of the CC of Ukraine is now only for authorities, and it is still procedurally unlawful to apply it regarding other categories of taxpayers (it does not exclude the investigation in the future, when the procedural issues are properly resolved by the law! Since Article 212 of the CC of Ukraine itself is not withdrawn yet). Perhaps it is to the better, such a kind of “holidays” for the general social groups, while the relevant rules are being “tested” in the authorities. Perhaps it will implicate changes to Article 212 of the CC of Ukraine, the necessity of which was repeatedly spoken, however, it struck the rejection of the authorities. The own experience may be more convincing regarding the need for changes that would make impossible to use Article 212 of the CC of Ukraine and investigation under it as an instrument of pressure.

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.

Kind regards,

© WTS Consulting LLC, 2017

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