In practice in many cases the tax officers demand provision of explanations on some issues from the taxpayers. Rather often tax audit acts contain a statement that the explanations during the tax audit were not provided by the taxpayer.<\/p>\n
Do the tax officers have a right to demand the explanations from the taxpayers at all?<\/p>\n
The initial version of the Tax Code of Ukraine contained the rules on the right of the tax authorities to demand the explanations. However, these rules were immediately excluded as the inconsistency of the constitutional rules under the proposals of the President. Thus, in the Proposals of the President of December 02, 2010 (the text is available on the web-site of the Verkhovna Rada of Ukraine: the Proposals of the President of Ukraine to the Tax Code of Ukraine<\/span><\/a><\/span>), \u00a0<\/span>submitted to the Verkhovna Rada of Ukraine on the immediate amendments to the Code (proposals of which were supported by the Verkhovna Rada respectively), among the shortcomings which need to be immediately eliminated, the following items have been also mentioned:<\/p>\n “\u2026IX. Absence of clear definiiton of the procedure of tax control and increase of the administrative pressure<\/span><\/p>\n \u0412. The Code envisages the obligation of the taxpayer to provide the explanations on the tax issues during the audit (para.81.3 of Article 81).<\/span><\/p>\n Such obligation contradicts the Constitution of Ukraine, which stipulates that any person does not bear responsibility for refusal to provide the explanations in regards to him\/herself, members of the family or near of kin (Article 63). Therefore, the Main Law of the country guarantees the right to refuse from provision of explanations on any issue, including the tax issues.<\/p>\n Under these circumstances the rules on implementation of the legislative enforcement for the taxpayers to provide the explanations on the tax issues shall be excluded from the Code. Instead, the Code shall stipulate the right of the taxpayer to refuse from provision of such explanations and envisage the legislative guarantees of this right.<\/p>\n “In particular, I offer to exclude :<\/span><\/p>\n Such approach was supported by the Verkhovna Rada and the Code became effective in its version of December 02, 2010, according to which the absence of the right of the tax authorities to demand the explanations was obvious.<\/p>\n Later there were some attempts \u201cto correct\u201d the President on this issue. Thus, the legislators missed the respective \u201ctrick\u201d of the Law No. 3609-VI of 07.07.2011, in which the amendments to subpara 20.1.2 of the Tax Code were made to provide the tax authorities with the right to demand the explanations. This subpara. of the said law was presented in the following version:<\/p>\n “20.1.2. during the audits to demand \u2026 and explanations on the issues arising during the audits and are related to realization of the powers of the state tax authorities, established by this Code and other laws of Ukraine\u2026<\/span>\u201d.<\/p>\n Therefore, the provisions which were excluded on the proposal of the President of Ukraine as such that contradicts the Constitution of Ukraine, were returned.<\/p>\n At that time we drew attention at this aspect in public comments in press (for instance, the article of “Kontrakty” No. 31-33 of August 8, 2011), on the web-site (see the project “CODE NO”, material of July 12, 2011) as well as by means of direct appeal to the Administration of the President on July 12, 2011 on the said actions which contradict the official position of the President, stipulated in the public document.<\/p>\n It is envisaged that maybe this moment was one of the reasons why the said law was not signed by the President for a long period of time and it could even be returned to the Verkhovna Rada. At some period of time it was said that such decision has already been made (see, for instance the article<\/span><\/a><\/span>\u00a0of “Ekonomichna Pravda” of August 1, 2011). However later, as per our understanding in view of the urgency of other changes under the said law, it was actually signed by the President, hereat the information was provided that the respective amendments on the brought issue will be made later as work proceeds with other draft laws on amendments to the Tax Code.<\/p>\n This was actually done by the Law No. 4834-VI of May 24,2012, which stipulates the following:<\/p>\n “in subpara. 20.1.2 to exclude the words \u201cand explanations on the issues that arise during the audits and concern realization of powers of the state tax authorities established by this Code and other laws of Ukraine\u2026<\/span> \u201d.<\/p>\n Therefore, Article 20 of the Tax Code or any other Article does not provide the right to the tax officers to demand provision of explanations.<\/p>\n Since the officials of the controlling authorities shall follow the Constitution of Ukraine and act solely in accordance with the Tax Code and other respective laws of Ukraine, then the requirements of the tax officers on provision of the explanations violate the requirements of part 2 of Article 19 of the Constitution of Ukraine and in particular of subpara.21.1.1 of Article 21 and other respective provisions of the Tax Code of Ukraine.<\/p>\n By the requirements of the tax officers on provision of explanations (if such required) the position of the President (as the Protector of the Constitution) on the discussed issue, which was voiced in public and confirmed by respective actions, is being also ignored and discredited.<\/p>\n Such actions of the tax officers do not conform to the law.<\/p>\n To summarize the above, the tax officers do not have the right to require the explanations from the taxpayers. <\/strong><\/p>\n 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.<\/strong><\/em><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" <\/p>\n <\/p>\n In practice in many cases the tax officers demand provision of explanations on some issues from the taxpayers. Rather often tax audit acts contain a statement that the explanations during the tax audit were not provided by the taxpayer.<\/p><\/div>\n Do the tax officers have a right to demand the explanations from the taxpayers at all?<\/p>\n The initial version of the Tax Code of Ukraine contained the rules on the right of the tax authorities to demand the explanations. However, these rules were immediately excluded as the inconsistency of the constitutional rules under the proposals of the President. Thus, in the Proposals of the President of December 02, 2010 (the text is available on the web-site of the Verkhovna Rada of Ukraine: the Proposals of the President of Ukraine to the Tax Code of Ukraine<\/span><\/a><\/span>), <\/span>submitted to the Verkhovna Rada of Ukraine on the immediate amendments to the Code (proposals of which were supported by the Verkhovna Rada respectively), among the shortcomings which need to be immediately eliminated, the following items have been also mentioned:<\/p>\n <\/div>\n <\/span><\/strong><\/div>\n \u0412.<\/strong> The Code envisages the obligation of the taxpayer to provide the explanations on the tax issues during the audit ( para.81.3 of Article 81).<\/span><\/span> <\/p>\n <\/p>\n <\/p>\n Later there were some attempts \u201cto correct\u201d the President on this issue. Thus, the legislators missed the respective \u201ctrick\u201d of the Law No. 3609-VI of 07.07.2011, in which the amendments to subpara 20.1.2 of the Tax Code were made to provide the tax authorities with the right to demand the explanations. This subpara. of the said law was presented in the following version:<\/p><\/div>\n “20.1.2. during the audits to demand<\/span> \u2026 and explanations<\/span> on the issues arising during the audits and are related to realization of the powers of the state tax authorities, established by this Code and other laws of Ukraine; \u2026\u201d<\/span><\/div>\n Therefore, the provisions which were excluded on the proposal of the President of Ukraine as such that contradicts the Constitution of Ukraine, were returned.<\/p><\/div>\n At that time we drew attention at this aspect in public comments in press (for instance, the article<\/span><\/a><\/span> of “Kontrakty” No. 31-33 of August 8, 2011), on the web-site (see the project “CODE NO”<\/span><\/a><\/span>, material of July 12, 2011) as well as by means of direct appeal to the Administration of the President on July 12, 2011 on the said actions which contradict the official position of the President, stipulated in the public document.<\/div>\n\n
March 5, 2013<\/em><\/span><\/div>\n
In particular, I offer to exclude : <\/span><\/span><\/div>\n
the words from subpara. 16.1.8 of para. 16.1 of Article 16 \u201cto provide explanations on the tax issues in cases, envisaged by the laws\u201d;<\/span><\/div>\n
the words from subpara. 20.1.2 of para. 20.1. of Article 20 \u201cand explanations on the issues that arise during the audits and are related to realization of powers of the state tax authorities, established by this Code and other laws of Ukraine\u201d ; <\/span><\/span><\/div>\n
the words \u201cexplanations and\u201d from para 20.1.23;<\/span><\/div>\n
the word \u201cobligatory\u201d from para.78.1.4.; <\/span><\/div>\n
the words \u201cto provide explanations on the issues of taxation in cases, envisaged by this Code\u201d from subpara. 81.3 of Article 81;<\/span><\/div>\n
subpara. 83.1.5 of para.83.1. of Article 83. \u2026\u201d<\/span><\/div>\n