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Statistics of criminal proceedings under Article 212 of the Criminal Code of Ukraine (“Tax evasion”) for the first half of 2020

28 July, 2020 Newsletters

Coronavirus has changed normal life in all areas. However, some areas, such as law enforcement, are apparently immune to COVID-19. Thus, the statistics of actual criminal proceedings opened were almost unchanged by quarantine. The issue of tax police reform also remains relevant, in particular, on June 30, 2020, a sitting of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy was held, at which the draft law No. 3087-д of July 2, 2020 on the Bureau of Economic Security of Ukraine was adopted as a basis1.

Traditionally, we refer to the statistics of the Prosecutor General’s Office of Ukraine on the criminal proceedings initiated. According to such statistics, 480 criminal offenses for tax evasion were registered in the first six months of 2020. In general, for several years we have seen a steady slowdown in the tendency to open criminal proceedings. Compared with the indicators of the same period in 2019, the number of initiated criminal proceedings decreased by 29.6%2. However, we attribute this decrease to the suspension of business activities and a moratorium on documentary tax audits.

When it comes to the results of the pre-trial investigation for the first 6 months of 2020, one can see that the time released did not in any way affect the quality of the pre-trial investigation, after all, as before, the statistics do not confirm a significant number of proceedings that would end with the indictment being sent to court.

The following picture shows schematically the main indicators of the pre-trial investigation for the first half of this year.

As we can see, the number of closed criminal proceedings (21 versus 28 proceedings in 2019) as well as the number of notifications of suspicion has decreased significantly (17 versus 68).

On the one hand, it is clear that during the quarantine it was not possible to conduct a full pre-trial investigation, however, on the other hand – what stopped tax police officers from concentrating their free time on completing the pre-trial investigation in those proceedings where the suspicion was substantiated? The question, of course, is rhetorical, but once again it seems that budget funds are just wasted “down the drain”.

However, the pandemic had the greatest impact on the litigation, as the number of confirmed tax evasions at the level of criminal proceedings is even smaller. Thus, according to the Unified State Register of Court Decisions, in the first half of 2020 only 2 sentences were handed down, both are indictments. A brief description of these sentences is in the Addition.

Interestingly, both sentences in cases No. 127/2534/203 and No. 750/12878/194 concerned persons who, as individual entrepreneurs, abused the simplified taxation system, evaded the payment of the single tax, personal income tax, value added tax and war fee. In particular, in the cases the courts found that individuals deliberately underestimated and did not reflect taxable income in order to remain single tax payers and, as a result, did not tax the amount exceeding the limits for individual entrepreneurs at a rate of 15%, did not file an application for waiver of the simplified taxation system and did not switch to the general taxation system, did not file a declaration of property status and incomes, did not declare such incomes and did not tax them at the rate of 18%. In addition, such individuals, despite the legal requirement, did not register as VAT payers and, as a result, evaded VAT.

So far, we do not see any changes for the better. As before, criminal proceedings for tax evasion are more a means of pressure than a real investigation of criminal offenses.

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.

Footnotes:

1Draft Law on the Bureau of Economic Security of Ukraine

2For the same period in 2019, the pre-trial investigation authorities opened 653 criminal proceedings for tax evasion.

3In the USRCD by the link.

4In the USRCD by the link.

Kind regards,

© WTS Consulting LLC, 2020

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