Tax Disputes and their alternative treatments as crime – current threats
In case of disputes on taxation issues both control and investigating authorities have standard intension – to regard such issues from criminal point of view. We are talking not only about “native” Article 212 of the Criminal Code regarding the tax evasion, but also certain alternative qualifications.
In particular, there are attempts to qualify the tax evasion also under Article 358 (forgery of documents) or Article 366 (forgery commited by officials) of the Criminal Code of Ukraine (hereinafter referred to as “the Criminal Code”).
Such actions can be motivated, in particular, by intension to regard a tax dispute from criminal point of view even in case when the sum of such dispute does not exceed the minimal limit defined by Article 212 of the Criminal Code (currently 609 000 UAH). The abovementioned alternative qualifications are either unrelated to any limit, or (para. 2 Article 366) are related to the limit which is beneath the limit defined by Article 212.
Possibility to apply mentioned articles in connection with tax disputes is not completely new practice. Thus, the Resolution of Plenary Assembly of the Supreme Court of Ukraine “On particular issues as regards application of law on liability in case of evasion of taxes, fees or other obligatory payments” as of October 8, 2014 No.15 defines:
«14. In case of evasion of taxes, fees or other obligatory payments or its concealment is committed using the forgery of documents, actions of guilty person shall be additionally qualified under Article 366 or Article 358 of the Criminal Code. Herewith, forgery committed by official can be qualified under Article 366 of the Criminal Code notwithstanding for what type of liability (criminal or administrative) such person will be held responsible for evasion of taxes, fees or other obligatory payments».
At the same time, in our opinion, if information adequacy in the official documents or adequacy of such documents by themselves are connected with taxation issues, actions of the taxpayers’ officials shall be qualified under articles 358 and 366 of the Criminal Code only additionally to the qualification under Article 212 of the Criminal Code of Ukraine (by the way as it is set forth in the abovementioned para. of the Resolution of Plenary Assembly of the Supreme Court of Ukraine). Filling tax declarations or other taxation documents with incorrect data or forgery of such documents, in cases when it has not caused actual non-receipt of funds to the budgets in the amounts, envisaged by Article 212 of the Criminal Code of Ukraine, cannot be deemed as criminal action.
Part 2, Article 11 of the Criminal Code of Ukraine defines that “even if act or omission has features of any action envisaged by this Code, but due to its insignificance constitutes no social danger, i.e. did not and could not cause considerable damage to a person or legal entity, society or government, it cannot be considered as offence”.
We shall remind that according to part 1 Article 11 of the Criminal Code of Ukraine only guilty act can be deemed as offence. Forms of guilt are defined in Section V of the Criminal Code of Ukraine. They envisage certain direction of acts or omission of responsible person. In case if acts or omission are directed at reducing of tax amounts payable (their actual receipt to the budget), then exactly the amount of such non-received taxes to the budget shall be considered as criteria of significance of social danger (damage) as referred to above in part 2 of Article 11 of the Criminal Code of Ukraine.
Barrier of significance for taxation issues is defined by Article 212 of the Criminal Code. Thus, if such barrier is not achieved, then separate qualification under Article 358 or Article 366 of the Criminal Code of Ukraine concerning the forgery of documents or data corruption in taxation documents shall be viewed as illegal.
In view of abovementioned the position stated in recent letter of the SFSU as of September 25, 2015 No. 8960/99-99-10-03-02-14 signed by the Head of the SFSU Roman Nasirov (the letter is available in the Internet) is quite astonishing. By the Letter-response the Head of the fiscal body indicateson the possible bringing to criminal responsibility for forgery of documents (Article 358 of the Criminal Code) or forgery, committed by officials (Article 366 of the Criminal Code) as a consequence of introducing false information into tax declaration even in case of overstatement of income indices.
Since such actions as overstatement of income index in declaration can hardly cause underpayment of taxes to the budget then what is the social danger and damage of such actions? How such damage can be measured?
In such case the state budget is more likely to receive additional funds and the social danger is out of the question.
We would like to mention additionally that components of crime envisaged by articles 358 and 366 of the Criminal Code contains as obligatory element such circumstance as intention, namely the consciousness of socially dangerous act [does overstatement of income indices contain such element?] and foreseeing of socially dangerous consequences [what exactly are they?].
Therefore, if the SFSU takes such position it shall at least indicate the social danger of such action as overstatement of income indices in tax declaration and what is the damage in such case (moreover which is in the competence of the fiscal service). At present we do not see any of such damage or danger. While the abovementioned position of the SFSU shall be considered as such which does not comply with the law.
Even in case of exceeding the barrier established by Article 212 of the Criminal Code the respective qualification under abovementioned articles is not always applicable.
Thus, the Higher Specialized Court for Civil and Criminal Cases in the Letter as of February 12, 2013 No. 223-286/0/4-13, with reference to the Decision of the Supreme Court (the Resolution No. 5-18 кс11 as of December 19, 2011), in particular stated that for accusing the person of causing (infliction) by its actions certain consequences, exactly the direct and immediate casual effect between its actions and consequences, not an indirect one, shall be present. Then “if the person with intent to evade taxes, duties (obligatory payments) commits an official forgery, which is one of the ways of tax evasion, the consequences causing actual non-receipt to the budget or to the state specialized funds of respective amounts are covered by disposition of specific part of Article 212 of the Criminal Code and cannot be considered at the same time as grave consequences within the meaning of part 2 Article 366 of the Criminal Code”.
Finally for the sake of completeness we would like to bring into view again that during the tax dispute in case of choosing option of exemption from responsibility under part 4 Article 212 of the Criminal Code (due to payment of all charges with penalties before bringing to criminal responsibility), such exemption covers only Article 212 and is not applied automatically to the articles under which the additional qualification of action is possible (the same Articles 358 or 366 respectively). Therefore such risks shall be also considered while choosing the way of settlement of tax disputes and related criminal aspects.
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.