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Statistics of criminal proceedings under Art. 212 of the Criminal Code of Ukraine for the first half of 2019

31 July, 2019 Newsletters

Presidential election, early parliamentary election, reforming of state fiscal service bodies…

Did such factors affect the performance of the tax police, or such issues are not relevant enough for “ghosts” (let’s recall the fact that since 2017 the tax police did not exist normatively1)?

Traditionally, we recap to the statistics of criminal proceedings initiated (the statistics was published on the website of the Prosecutor General’s Office of Ukraine). According to such statistics, 653 criminal offenses for tax evasion were registered in the first six months of 2019. In comparison with the previous years, we see a slight decrease every year. For example, compared to the same period in last year (the first half of 2018), the number of criminal proceedings initiated decreased by 18.8%2.

However, such a reduction in the number of criminal proceedings initiated corresponds to a general reduction in the number of tax inspections, which are usually an integral part of criminal proceedings. Thus, according to the statistics of the State Fiscal Service of Ukraine on the number of tax audits, in the first half of 2018 the number of audits was 9 005, and in the first half of this year – 7 404. That is, the percentage of tax inspections is reduced by 17.8%. The number of criminal proceedings corresponds to the actual amount of tax audits. Therefore, trends in the use of criminal proceedings as a means of pressure on business do not change, the total number of criminal proceedings in the context of the number of tax audits remained unchanged.

For the sake of clarity, the relevant figures for criminal proceedings and the number of tax audits are given below.

The pace of completion of pre-trial criminal proceedings also remains relatively low. According to the statistics of the State Fiscal Service of Ukraine, in the first half of 2019 an investigation of 376 criminal proceedings for tax evasion was completed.

However, such an indicator is considered rather low and indicative of the ineffectiveness of the work of pre-trial investigation bodies, because, if we refer to the components of such indicator, 84% of completed criminal proceedings are closed due to lack of crime component (241 criminal proceedings) and transferring of cases to court with a motion for release from criminal liability (118 criminal proceedings).

Only 71 criminal proceedings have been sent to the court with indictments. About half3 of them conclude plea agreements (the amount based on the total number of indictments and the plea agreements in the courts of the State Fiscal Service of Ukraine). That is, again, cases where the actual investigation was not conducted because of the fact of plea of guilty and agreement to cooperate with the investigation. Criminal investigations concerned tax evasion, which were actually investigated and brought to court do not exceed the limit of 10% of the total number of completed pre-trial investigations. For clarity, the relevant indicators for the completion of criminal proceedings are set out below.

From the foregoing, criminal proceedings for tax evasion in most cases continue to resemble persecution for persecution, that is, such criminal proceedings continue to be nothing more than a means of pressure on taxpayers.

According to the results of the trial in criminal proceedings for tax evasion, the number of confirmed tax evasion even less. Thus, according to the Unified State Register of Court Decisions, there were 11 sentences in the first half of 2019: 7 indictments, 2 of which were based on plea agreements, and 4 no quilty judgements. For informational purposes, we offer you a brief description of all the verdicts in the Annex.

In general, the tendency remains unchanged – most cases relate to tax evasion in connection with the commission of non-commodity transactions, which, as before, concomitantly qualify under Art. 205, 358, 366 of the Criminal Code of Ukraine.

There are still widespread cases of initiation of criminal proceedings prior to the reconciliation of monetary obligations based on the results of the audit, although, apparently, such a question should have already been resolved to some extent since 2014 (see the information sheet “Regarding the changes of the moment of the initiation of criminal proceedings upon the results of tax audits” with material amount of tax assessed, however, as it was supposed, to unambiguously resolve this problem, it is advisable to fix the changes at the level of law. Accordingly, there are quite frequent cases where the initiation of criminal proceedings in connection with the haste has also proved to be unfounded, given that the court delivered a judgment of no guilty based on the results of the case No. 569/6727/15-k.

Also noteworthy are the arguments of the courts in judgements of no guilty in cases No. 640/3526/16-k and No. 332/2769/17 regarding the evaluation of criminal proceedings materials. on officials of enterprises-counterparts, where the courts correctly noted that the materials of such criminal proceedings can not be relevant evidence of the guilt of the taxpayer.

The effectiveness of tax investigations in criminal cases on tax evasion cases also remains relatively low. Thus, a total of UAH 6 115 099,02 was awarded for compensation, while losses incurred by the State in connection with such tax evasion amounted to UAH 21 255 194.80.

To sum up, the statistics of criminal proceedings for tax evasion once again confirm the need for legislative and institutional changes in the work of pre-trial investigations of the fiscal direction. It is hoped that the next reform of the Fiscal Service will help to resolve the problem of “looping” criminal proceedings as a result of tax audits and will have a positive impact on the effectiveness of pre-trial investigation of criminal proceedings and reduce the number of cases of unjustified pressure on businesses through such criminal proceedings.

All verdicts are available at the link.

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:

1With the entry into force on January 1, 2017, the Law of Ukraine “On Amendments to the Tax Code of Ukraine on improving the investment climate of Ukraine” of December 21, 2016 No. 1797-VIII, which excluded Section XVIII-2 “Tax Police” from the Tax Code of Ukraine – tax investigators were deprived of any authority, including the authority to conduct pre-trial investigation.

2For the same period in 2018 804criminal proceedings for tax evasion were opened.

3Thus, during the first half of 2019, the prosecution authorities have brought to court 500 indictments on criminal proceedings under the jurisdiction of the SFS of Ukraine, 221 of them are pleaded guilty. Thus, the probability of transferring of a case with the plea agreement is 44%.

Kind regards,

© WTS Consulting LLC, 2019

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