Statistics on criminal proceedings under Article 212 of the Criminal Code of Ukraine or what kind of year was 2015 for the taxpayers?

23 February, 2016 Newsletters

According to the statistic information available on the official web site of the Prosecutor General’s Office of Ukraine, tax police have registered 1 665 criminal proceedings on tax evasion during 2015 (Article 212 of the Criminal Code of Ukraine).

It shall be noted that the number of criminal proceedings against the taxpayers in 2015, comparing with 2014, remains almost unchanged. Thus, the number of criminal proceedings in 2015 has decreased to 10 % 1. However, during the 1st quarter of 2015 a significant number of taxpayers applied a tax compromise. Therefore, such decrease is rather “technical”.

In total, the bodies of prejudicial investigation have operated 2 697 criminal proceedings against tax evasion2 during 2015, taking into account criminal proceedings, opened during the previous years. Such number of proceedings is due to functioning of the automatic mechanism of their opening.

It shall be mentioned that the existing thresholds of criminal liability without their consideration (more details in our newsletter by the link), the number of criminal proceedings will grow.

Under such circumstances, effective investigation of the criminal proceedings by the tax authorities shall not even be expected, since along with the necessity of «cleaning out the Augean stables” of the previous years, investigating departments shall also provide investigation of new criminal proceedings.

By the way, as to the effectiveness of the preliminary investigation – in 2015 the authorities of prejudicial investigation have delivered notification on suspicions only in 142 criminal proceedings (approximately 5.5 % of the total). While at the stage of preliminary investigation 1 025 criminal proceedings under Article 212 of the Criminal Code of Ukraine were closed in 2015.

It shall be noted that existence of the criminal proceeding itself creates adverse effects for the taxpayer because of the actual pressure on him and barriers on economic activities, including numerous summons of officials and employees of enterprises to interrogation and other procedural activities, including those, connected with receiving temporary access to documents at the enterprise by the investigator. However, we shall note that most of such activities are performed by the investigative units before the notifications on suspicion are delivered.

Such state of the criminal proceedings, considering our experience and based on the official statistics, unfortunately, can last for years. The solution of this situation is possible only through joint efforts by amending the Criminal Code and Code of Criminal Procedures of Ukraine. Read more about this opportunity by reference.

To evaluate the efficiency of criminal proceedings investigation on tax evasion in general, data on the courts activity, which is available on the official website of the Executive power bodies of Ukraine shall be taken into consideration.

According to the report of first instance courts, in 2015 the courts have delivered 64 verdicts in proceedings on tax evasion, 15 of which – with the approval of plea agreement. That is, in almost 25 % of the criminal proceedings plea agreements have been approved; that attracts attention of taxpayers due to recent negative tendencies in disputes on cancellation of tax notifications-decisions.

The number of acquittals according to the Unified State Register of court decisions that have passed the appeal and entered into force, is only 11 for 2015, accordingly.

Thus, the share of the courts verdicts in relation to the total number of criminal proceedings in the preliminary investigation bodies under Article 212 of the Criminal Code of Ukraine for 2015 is 2.4 %, and the share of acquittals – 0.4 %.

These statistics show the ineffectiveness of prejudicial investigation, which is caused by the functioning of the automatic mechanism of criminal proceedings opening based on the results of every audit of the taxpayer.

As seen from the above, only 2 % of the criminal proceedings on tax evasion, which were investigated in 2015, concerned real crimes. The other part of the criminal proceedings under Article 212 of the Criminal Code of Ukraine is 98% from the total number of proceedings against the taxpayers is nothing more than just the means of influence and pressure on the taxpayers with the purpose of provision of the state budget “replenishment”.

It shall be also mentioned that the results of the tax audit of the taxpayers within the criminal frames are not limited by criminal proceedings under Article 212 of the Criminal Code of Ukraine. Details of alternative qualifications are available in our publication “Tax dispute or crime?”.

Considering the fact that under the results of tax audits, when overstating of the amounts of budgetary reimbursement is established, cases when criminal proceedings under Article 191 of the Criminal Code of Ukraine occur, let us briefly analyze the statistics on investigations in this article.

Thus, the bodies of prejudicial investigation, exercising control over tax legislation adherence, have started 124 criminal proceedings under Article 191 of the Criminal Code of Ukraine during 2015.

Though, suspicions in criminal proceedings under Art. 191 of the Criminal Code of Ukraine were delivered only in 12 criminal proceedings and 7 were submitted to the court with the indictment.

As we see, the indicators on effectiveness of criminal proceedings investigations with alternative qualifications (under Article 191 of the Criminal Code of Ukraine) almost do not differ from the general tendency of criminal proceedings under Article 212 of the Criminal Code of Ukraine.

To sum up, we shall note that the overall tendency of the criminal proceedings based on the results of tax audits in 2015 does not differ from previous years and still affirms focusing of a large part of criminal proceedings solely on “replenishment” of the state budget.

Statistical data, presented in this newsletter, are available on the web site of the Prosecutor General’s Office of Ukraine and on the official web site of the judicial authorities, as well as are also available in pdf-files in chart 1 and chart 2.

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:

1 According to the Prosecutor General’s Office of Ukraine, 1 816 proceedings were opened in 2014 under Article 212 of the Criminal Code of Ukraine.  

2 Under the official data of the Prosecutor General’s Office of Ukraine, the total number of criminal proceedings (CP) in 2015 is 2 697. The total number of criminal proceedings is calculated by us by the following formula: “CP, under which no decision is taken at the end of the reporting period (1 537) + CP with the closed proceedings (1 025) + CP with the stopped proceedings (7) + CP under which the proceedings are taken to court (128)”.

Kind regards,

© WTS Consulting LLC, 2016

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