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Statistics of criminal proceedings on taxes for 2020: Goodbye, the tax police! Hello, the Bureau of Economic Security of Ukraine!

17 February, 2021 Newsletters

On January 28, 2021 the Parliament (Verkhovna Rada) of Ukraine adopted the Law of Ukraine “On the Bureau of Economic Security of Ukraine” (the bill No. 3087-д of July 2, 2020), which establishes the Bureau of Economic Security of Ukraine as the only body of pre-trial investigation with jurisdiction over criminal offenses of economic nature. Now the bill has been submitted for signature to the President of Ukraine. Hence, once again the business community is waiting for “another” reform, and the tax police (in 4 years after the loss of authority and legal status) will be liquidated within six months from the date of enactment of this Law.

In the meantime, let us dwell on the results of work of the tax police for the year 2020.

Thus, according to the official statistics of the Prosecutor General’s Office of Ukraine, only 1 019 tax evasion criminal proceedings were registered in 2020. This index is 20.8 % less than the number of open proceedings in 2019.

This decrease is caused not so much by the fact of the COVID-19 pandemic or quarantine restrictions, but rather by the absence of a significant number of tax audits, the results of which encourage the tax police to initiate criminal proceedings for tax evasion.

The number of closed criminal proceedings in 2020 amounted to 112 proceedings, that corresponds to 11% of the open criminal proceedings. At the same time, in 2020, the tax police handed out 48 notifications of suspicion of tax evasion. Therefore, as one can understand, the Bureau of Economic Security of Ukraine will inherit numerous “Augean stables” from the tax police during the transfer of jurisdiction to the newly formed body.

As regards the results of the tax police work, though they, of course, can hardly be called “the results”: by the end of 2020 the Prosecutor’s Office together with the tax police had managed to complete investigations only in 38 criminal proceedings, in 10 of which the prosecution brought an indictment to court. In the remaining 28 cases, the prosecution asked for discharge from criminal liability. In other words, most of the criminal proceedings submitted to court are not actually the results of the pre-trial investigation.

As to the court proceedings of cases for tax evasion, there is a significant decrease in the number of judgments delivered. As we understand, such decrease is caused by the COVID-19 pandemic and quarantine restrictions.

Thus, in 2020, there were only 7 verdicts: 5 verdicts of guilty and 2 verdicts of no guilty. It should be noted that this index of the court cases is the lowest for the last four years:

At the same time, despite the small number of verdicts, the courts delivered a significant number (97) of resolutions on discharge from criminal liability, most of which were delivered either in connection with compensation of the damage caused to the state by their late payment or the expiration of the terms of criminal liability.

For convenience, a detailed description of all the verdicts and resolutions on discharge from criminal liability for 2020 is brought to your attention in the Addition1.

It is notable that in recent years we have seen an interesting trend towards the disappearance of such a phenomenon as guilty verdicts based on plea agreements, which were a widespread phenomenon 3-6 years ago (read more on this in our newsletters “The plea agreements under Article 212 of the Criminal Code of Ukraine. The main trends” and “Criminal proceeding on the basis of plea bargaining under the new Code of Criminal Procedure of Ukraine. The first experience in court cases on white collar crimes”).

Thus, during 2020 only 1 guilty verdict was delivered based on a plea agreement. However, even such a verdict had a certain peculiarity, since the agreement was concluded between the accused and the Specialized Anti-Corruption Prosecutor’s Office, which brought a prosecution in connection with the investigation of the crime also under part 3 of Article 209 of the Criminal Code of Ukraine (legalization of criminally obtained property committed by an organized group or in especially large amounts). Case No. 760/13922/202 concerned the accusation of two persons (the head and the owner) of the legal entity, notorious Optimumspetsdetal LLC, which was connected with the withdrawal of funds from the State Concern Ukroboronprom through the conducting non-commodity transactions. Within this case the accused were charged with tax evasion in especially large amounts by way of reflection in VAT returns the tax invoices data containing unreliable/false information on purchase of goods by Optimumspetsdetal LLC from business entities and groundless allocation of “sham” VAT amounts to the enterprise’s tax credit. The total amount of tax evasion on such transactions amounted to UAH 46 402 556,07.

However, as follows from the text of the verdict from the Unified State Register of Court Decisions, the accused had cooperated with the investigation. As a result of such cooperation, they were sentenced to five years of imprisonment with forfeiture of property, and to forfeiture of property with release from serving the sentence with a probation period of one (1) year.

Moreover, it is worth mentioning that according to Article 469 of the Criminal Procedure Code of Ukraine the plea agreement in the proceedings concerning the crimes, which are within the investigative jurisdiction of the National Anti-Corruption Bureau of Ukraine, may be concluded only provided that the suspect or the accused hand over other person committing the crime, which is within the competence of the National Anti-Corruption Bureau of Ukraine. Therefore, the compensation of the budget losses from tax evasion in the amount of UAH 46 402 556,07 might have been appropriately secured, but the investigation has received, instead, the incriminating testimonies about the other persons. However, the testimony is not yet a real sentence on such persons.

It is also interesting to analyze the Resolution on discharge from criminal liability in case No. 371/1635/173, where the court itself established that the accused does not admit his guilt but insists on the closure of the criminal proceeding at this stage, without consideration of the case on the merits. This confirms that it is easier for most people to agree on the discharge from liability than to prove their innocence during the consideration of the case on the merits, even with discharge from liability on non-rehabilitating grounds. The same situation was several years ago with sham entrepreneurship in proceedings under Article 205 of the Criminal Code of Ukraine. Obviously, this state of affairs is “handy” for the investigation, since it seems like an achievement and one more successful statistics to the credit of the investigation and prosecution.

However, when it comes to money and the actual economic compensation for damages caused to the state as a result of tax evasion, here is the following situation: a total of UAH 894 748 821,68 was awarded for compensation for 2020, and damages caused to the state amounted to UAH 1 083 843 099,78. So, the criminal proceedings for tax evasion do not fully compensate for damages caused to the state – and that is not including the cost of maintaining all the staff of the tax police and the administrative staff of the State Fiscal Service of Ukraine.

Practice shows that, unfortunately, the tax police is ending its existence not on a high note, and we hope the Bureau of Economic Security will not become a new “old” tax police.

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.


1Court decisions are available by the link.

2In the USRCD by the link.

3In the USRCD by the link.

Kind regards,

© WTS Consulting LLC, 2021

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