Statistics of criminal proceedings under Art. 212 of the Criminal Code of Ukraine for three quarters of 2020
For several years, the issues related to the tax police activities do not leave the first positions among the questions of business to the government, not only due to the lack of legal grounds, but also given the unjustified opening and delay in closing the criminal proceedings against business. These issues are tried to be solved by another “reform”, namely by the creation of the Bureau of Economic Security of Ukraine (Verkhovna Rada of Ukraine adopted the bill in the first reading on September 3, 20201). But will the establishment of the single body with essential powers actually resolve these issues without systematic changes to the criminal procedure legislation and still applying the same vague provisions of Article 212 of the Criminal code of Ukraine? Or it probably will make everything worse – considerations in this regard are in following infoletters “It’s better to keep it the way it is than such Bureau on Economic Security of Ukraine, Bureau on Economic Security of Ukraine: a secure come back to insecure practice?”.
However, we propose to return to the analysis of the current work of the tax police, especially in view of recent media activity on its achievements. Not long ago the management of the State Fiscal Service has published2 data on the effectiveness of the tax police from 1998 to the present. For example, we provide data for the period of 9 months of 2020:
Such indicators immediately raise many questions, because they are much more optimistic than the similar indicators for 9 months of 2020, which were provided by the Prosecutor General’s Office (relevant statistics).
According to the data of the Prosecutor General’s Office, 784 criminal offenses for tax evasion were registered for three quarters of 2020, which is 19% less than last year3.
Therefore, there are some questions about the number of criminal proceedings directed to Court, even based on the number of registered criminal proceedings in general. Of course, we could assume that during the quarantine and moratorium on inspections, the tax police decided “to catch up on” and pay more attention to the completion of the pre-trial investigation in the criminal proceedings, which have already been initiated.
However, the official website of the Prosecutor General’s Office also includes information about the direction of criminal proceedings to Court. Only 30 criminal proceedings under Article 212 of the Criminal Code of Ukraine have been directed to the Court for 9 months of 2020. And even if we take the entire list of criminal offenses that are subject to tax police under exclusive jurisdiction4 (unfortunately, it is not possible objectively to assess the number of proceedings investigated concurrently under paragraph 2 of Part 3 of Article 216 of the Criminal Procedure Code of Ukraine), 466 criminal proceedings were directed to Court, of which 304 are proceedings under Article 205-1 of the Criminal Code of Ukraine (submission of forged documents for state registration).
Therefore, there is a significant inconsistency in the indicators which are provided by the State Fiscal Service and the Prosecutor General’s Office, because in general the results of the pre-trial investigation according to the Prosecutor General’s Office look like this:
As one can see, the indicators of completed criminal proceedings under Article 212 of the Criminal Code of Ukraine are also at the low level.
While in the third quarter of 2020 at the level of the court trial neither acquittal nor guilty verdict was delivered. At the same time, 23 court rulings on exemption from criminal liability and closure of proceedings were issued during the period under review. Most of them (10 court rulings) were issued on the grounds of payment of taxes to the budget (Part 4 of Article 212 of the Criminal Code), a significant number of decisions (9 court rulings) have been issued due to the expiration of the statute of limitations for criminal liability. Description of all Court rulings on exemption from criminal liability and sentences for the period under review you may find in the Addition5.
It is interesting, that during three quarters of this year the exemption from liability based on court decisions on grounds of the payment of tax (compensation of damages) took place to the value of UAH 746,668,680. At the same time, according to the sentences passed in the same period, only UAH 4,133,044.57 were awarded. That is, it could be assumed that the effectiveness of the investigation of criminal proceedings, if it is measured by the compensation function, is traced mainly through the “provision” of voluntary compensation of damages (payment of extra charged taxes) for further release of officials from liability under Part 4 of Article 212 of the Criminal Code of Ukraine.
The tax police is trying to justify its activities with this result, but is it actually the result of its work? This question arose after the analysis of the actual text of the decisions on release from liability, as far as such decisions confirm that UAH 338,175,397 were paid before the start of criminal proceedings. I.e., criminal proceedings have been opened regarding the amounts of already paid taxes in 52% of the reimbursed amount of tax evasion6. And this fact directly confirms that the activities of the tax police, even in the field of “ensuring” voluntary compensation, are not effective. Moreover, it directly indicates to the intention of the tax police to provide good statistics on paper, by initiating criminal proceedings for the amounts of taxes already paid, where such criminal proceedings should not ever be instituted.
This conclusion, for example, is confirmed by the Decision of the Shevchenkivskyi District Court of Kyiv of September 8, 2020 in the case No. 761/23229/207 concerning the release from criminal liability of the chief accountant of the Subsidiary Company “Gas of Ukraine” of the National Joint-Stock Company “Naftogaz of Ukraine” due to the fact that the damage caused to the state was reimbursed in full before notifying the chief accountant of suspicion (under Part 4 of Article 212 Criminal Code of Ukraine).
Thus, the release from liability took place on the grounds of payment of UAH 285,269,157.4 of tax and penalties, which were accrued based on the results of the tax audit conclusions regarding the incorrect reflection of Court decisions on debt collection in the financial and tax accounting.
However, in this case one can see, firstly, all the signs of a tax dispute, which cannot be considered as a crime (read more on this in “Tax dispute vs. Crime”), because within the issue of the correct reflection of the court decisions on recovery of funds, it cannot be said unequivocally about the presence of intent, especially since a quite different approaches may be applied here and they shall be assessed by a competent court, namely by a court of administrative jurisdiction within a tax dispute.
Secondly, it is a classic case of complex pressure of tax and law enforcement agencies on the Company. Thus, according to the Unified State Register of Court Decisions, the Company, inter alia, was charged with the tax debt and the decision on the property inventory in a tax lien8 has been issued.
Finally, as it can be seen from the comparison of dates, the criminal proceeding against the chief accountant for tax evasion was initiated after the actual payment of the additional amount of tax by the Company. Therefore, unfortunately the corresponding actions are not explained by anything other than pressure on the Company or attempts to improve the statistics (the opening of proceedings, which are obviously subject to closure).
In view of the abovementioned and the realities of the tax police work, the expectations from the establishment of a single body with significant powers in the current opportunities for abuse, based on the imperfections of criminal and criminal procedure law, are unfortunately completely devoid of optimism.
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.
3 During the same period in 2019, the pre-trial investigation authorities opened 967 criminal proceedings for tax evasion.
4In accordance with Part 3 of Art. 216 of the Code of Criminal Proceedings of Ukraine, the investigative bodies that monitor compliance with tax legislation, carry out pre-trial investigation of criminal offenses under Article 204, 205-1, 212, 212-1, 216, 218-1, 219 of the Criminal Code of Ukraine.
6 In total, the reimbursed amount of evasion is UAH 649,166,276.
Statistics of criminal proceedings on taxes for 2019
Updating! False start. Increased liability on tax evasion
and some other crimes,
some other important changes of the Law on Amendments on Simplifying the Pre-Trial Investigation of Certain Categories of Criminal Offences
Decriminalization of “sham business activity”: what`s on practice?
Decriminalization of Art. 205 of the Criminal Code of Ukraine and changes to Art. 212 of the Criminal Code of Ukraine – increasing of taxes non-payment thresholds that may lead to criminal prosecution
What are the practical implications for current cases?