Initiating Criminal Proceedings and Pending Tax Assessments ~ U-Tax Blog

Saturday, April 28, 2012

Initiating Criminal Proceedings and Pending Tax Assessments

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In practice, there is a position that the criminal proceedings on tax evasion cannot be instituted until the underlying tax assessment becomes due (effective). The proponents of this position refer to para 56.22 of the Tax Code of Ukraine (before the enactment of the Tax Code of Ukraine, to para 5.2.6. of the Law of Ukraine "On the Procedure for Discharging Tax Liabilities to Budgets and State Special Purpose Funds"). According to these points of law in case of an appeal is filed against a tax assessment the tax evasion charges cannot be rested on such a tax assessments until the end of the appeal procedure, i.e. until the tax assessment becomes due (effective).

In my opinion, the position is more than questionable, especially given that:

1. Pursuant to the novelty incorporated into the Tax Code of Ukraine (para 58.4) a criminal investigation should precede the issuance of a tax assessment, and not vice versa;

2. The prohibition established by the specified legal provisions applies to tax evasion charges, not to the institution of a criminal case;

3. The above rules clearly prescribe that this prohibition does not extend to the cases where the tax evasion charges are not only bolstered by a tax assessment, but also by other evidence collected in accordance with criminal procedure law.

The court practice on the issue raised is not consistent. In most cases, the courts dealing with the complaints against the initiation of the criminal cases do not adhere to this position. They observe that the above prohibition covers tax evasion charges, rather than the institution of criminal cases. The decision of the Highest Specialized Court of Ukraine on Civil and Criminal Trials of 7 February 2012 in re Striy Plant Metalist, JSC* seems to be a classic example of such practice.

Nonetheless, some judges turn out to be the "apologists" of the given position, especially if at the time of the consideration of the complaint against the institution of criminal proceedings an administrative court has already canceled the relevant tax assessment. An example here is the decision of the Highest Specialized Court of Ukraine on Civil and Criminal Trials of 28 April 2011 in re Blits-Trade, Private Enterprise**.

1 comment:

  1. There would be a person, and criminal liability wil be.