Criminal proceedings regarding tax evasion: what has changed during the work of the Bureau of Economic Security of Ukraine?
On November 25, 2021, the Bureau of Economic Security of Ukraine (the Bureau), which replaced the tax police, began its activity. Previously we reported about this in our review “Let’s go!”: The Bureau of Economic Security of Ukraine has started its activity. In this review, we will try to consider whether there have been changes in relation to criminal proceedings regarding tax evasion.
According to the official statistics from the Prosecutor General’s Office of Ukraine, in 2021, a total of 1,008 criminal proceedings regarding tax evasion were registered. As can be seen from the chart below, the indicators of 2021 concerning criminal proceedings initiated are similar to those of 2020.
In other words, the indicators of the initiated criminal proceedings remained at the same level. Accordingly, as it is understood, the Bureau also used the old traditions of the tax police and initiated a significant number of criminal proceedings regarding tax evasion without justification to exert pressure on business.
The results of pre-trial investigations once again attest to this. In 2021, 32 notifications of a suspicion were served, while from November to December of that year – none of them. The materials of 32 criminal proceedings, only 10 of which were indictments, were also sent to court. The rest (22) were referred for examination regarding the discharge from criminal liability.
With regard to the court proceedings of cases concerning tax evasion, the courts issued 19 judgments, namely 11 judgments of conviction and 8 judgments of acquittal in 2021. Interestingly, during the last quarter of 2021, there was only 1 judgment (of acquittal) issued, while other court decisions were related to the discharge from criminal liability (82).
Let us focus on the analysis of the judgment of acquittal in the case No. 751/6681/21. Such a judgment was delivered against the Director General of the enterprise, which allegedly failed to pay the rent for the actual use of the municipal land on which the immovable property owned by the enterprise was located. Thus, the City Council calculated the losses from the non-receipt of the tax. However, there were no extracts from the State Land Cadastre and from the technical documentation regarding the normative monetary land value, as well as information from the State Land Cadastre. Therefore, in the course of court proceedings of the criminal case it was established that the enterprise was not the owner or permanent land user of the disputed land plot, and therefore is not a subject of payment for land in the form of a land tax. It was also established that the enterprise had taken all necessary measures to register its right to use the land plot.
Another part of the court decisions concerns the discharge from criminal liability under Part 4 of Article 212 of the Criminal Code of Ukraine due to the compensation for damage caused to the state and due to the expiration of statute of limitations for criminal liability.
For convenience, a detailed description of all judgments and decisions on the discharge from criminal liability during 2021 is attached as Annex 1.
If we refer to the economic side of the statistics under consideration, we can see that UAH 953,019,634.11 were reimbursed in 2021. For its part, the damage caused to the state has been evaluated at UAH 3,301,161,600.39. Despite a significant increase in the number of judgments passed by courts in 2021, the amount of reimbursed funds remained almost the same as in 2020: UAH 894,748,821.68 in 2020 and UAH 953,019,634.11 in 2021.
In other words, we can once again observe the inefficiency of tax evasion investigations in economic terms, as the damage caused to the state is more than 3 times greater than the amount of reimbursed funds (excluding the amount that has been spent on the maintenance of the entire staff of pre-trial investigation agencies).
In this regard, we can see that there is an attempt to ensure the compensatory function of liability for damage by increasing the amount of fines. Thus, the aggregate amount of fines will increase in 2022 due to the adoption and entry into force on November 25, 2021 of the Law of Ukraine as of November 17, 2021 No. 1888-IX, which strengthens criminal liability regarding tax evasion (Article 212 of the Criminal Code of Ukraine).
Hence, Part 1 of Article 212 of the new version of the Criminal Code of Ukraine establishes a fine in the amount of five thousand to ten thousand tax-free minimum incomes, that is, of UAH 85,000 to UAH 170,000 (the old version of the Criminal Code of Ukraine prescribed a fine of UAH 51,000 to UAH 85,000).
The same actions which were committed by a group of persons upon their prior conspiracy or if they resulted in actual non-receipt of large amounts of funds by budgets or targeted state funds will be punished by a fine of ten thousand to fifteen thousand tax-free minimum incomes, that is, of UAH 170,000 to UAH 255,000 (the old edition of the Criminal Code of Ukraine established a fine of UAH 85,000 to UAH 119,000).
In the meantime, despite such changes, it is unlikely that the compensatory function of fines regarding tax evasion can be fulfilled.
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.
An attempt to cancel “amendments of Lozovyi”– business, stand by!
Terms of pre-trial investigation [in ALL criminal proceedings, where no one was notified of suspicion], are terminated until the end of martial law. But what if to get a new angle on?
“Let’s go!”: The Bureau of Economic Security of Ukraine has started its activity
Statistics of criminal proceedings on taxes for 2019