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Tax police performance before liquidation.
Statistics of criminal proceedings regarding tax evasion for the first half of 2021

06 September, 2021 Newsletters

It is well-known that recently the Head of the State Fiscal Service of Ukraine (which includes the tax police) was “unexpectedly” appointed as the director of the Bureau of Economic Security of Ukraine1 (the BESU) (which is to be launched on September 25, 2021).

Does the tax police actually complete its work? Literally – yes, in fact – no, because we understand that unfortunately “surprises” are not expected during the process of the personnel selection for the BESU. So technically the tax police will only “flourish” because it will significantly expand the appropriate authority as a law enforcement agency.

1.

With what indicators does the tax police go to the BESU?

According to the statistics of the Prosecutor General’s Office of Ukraine regarding initiated criminal proceedings, 65 criminal violations were registered under Article 212 of the Criminal Code of Ukraine – tax evasion, for the first half of 2021. Compared to the same period in 2020, the number of criminal proceedings initiated decreased by 86.4 %2 (!!!). For the sake of clarity, the following statistics are given below in the chart:

Certainly, one wishes, that such a number of criminal proceedings has been caused by their opening only on reasonable grounds. In practice, however, based on our experience, the substantiality in the process initiation of criminal proceedings has not been added unfortunately. For those reasons, such indices may be a result of a quarantine and a moratorium on tax inspections.

2.

Moreover, in the first half of the year the indices of further results of investigation are also at the low level:

In fact, pre-trial investigation with at least some result was completed regarding only three cases where indictments were submitted to the court. Whereas the submission to the court of the criminal proceedings with motion on plea agreement (with the completion of the prosecution period or under part 4 of Article 212 of the Criminal Code) cannot be indicative of the pre-trial investigation effectiveness.

Overall we do not observe any activity in the pre-trial investigation (setting aside the increase in the number of suspicions by three in comparison with the same period last year).

3.

So, it’s clear that starting from September 25, 2021, all pending pre-trial investigations, numbering 5903 as of June 31, 2021, in some way or another will be inherited by the BESU, at least based on current trends of tax police activity.

Referring to data on judicial proceedings, according to the Unified State Register of Court Decisions, we can see that only nine verdicts were passed, including five verdicts of guilty and four verdicts of acquittal, as well as 49 decisions for relief from criminal liability in the first half of 2021.

We would like to notice that among the five verdicts of guilty, two verdicts of guilty, namely in cases No. 947/15030/20 (more information about this case can be found in our last review) and No. 520/12998/19 are related again to the so-called «Kurchenko’s schemes». For example, the case No. 520/12998/19 involved the distribution of petroleum products in the territory of Ukraine that were imported under the processing conditions and resulted in the intentional evasion from customs and VAT payments in total of UAH 1 806 381 226,71. Interestingly, the liability of the individual under the corresponding verdict: a fine of UAH 425,000 which is actually covered by punishment in the form of imprisonment (and thus not payable) and the individual is relieved of the punishment on condition that he/she shall not commit another crime within two years. No civil claim was brought in the proceeding under discussion. That is, the issue of damage compensation caused by a criminal violation remained open.

Therefore, the verdict in the case No. 641/7138/19 is also worth paying attention. It concerned the director of the enterprise who sold liquefied gas, purchased at specialized auctions, to industrial enterprises at a commercial price, whereas such gas should be sold for the needs of the population. By such actions, the director violated the conditions for the allowable use of liquefied gas and as a result avoided paying excise tax in the amount of UAH 29 227 718,53.

For complete list of court decisions, please find below a brief overview of all imposed verdicts and decisions in the Addition.

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:

1The Decree of the Cabinet of Ministers of Ukraine is available by the link.

2Pre-trial investigation authorities opened 480 criminal proceedings for tax evasion in the same period of 2020.

3According to the statistics of the Prosecutor General’s Office by the link.

Kind regards,

© WTS Consulting LLC, 2021

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