First Results of Tax Crimes “Decriminalization” of Tax Offences

On March 23, 2010 a round table devoted to the issues of increase in the efficiency of control and taxpayer’s right protection was organized in the Federation Council.

The first result of contraction of the authority of the Ministry for Internal Affairs taking place in 2009 together with the result of adoption of the Federal Law fr om 29.12.2009 No 383-FZ, that eventually stated the possibility for exemption from criminal liability of the taxpayer that paid off the arrears and fees were discussed at the meeting. The estimation of productivity of the novations mentioned was presented in speeches made by the vice-director of Legal Department of RF Ministry for Internal Affairs Soloviev I.N., temporarily head of the tax crimes department of the State Department for Internal Affairs in Moscow A. Ya. Kazakova, and the head of analytical service “Pepelyaev and partners” Zaripov V. M.

The general opinion of law enforcement bodies’ representatives and experts is that the limitation of authority of the law enforcement bodies taking place against the background of the crisis and the decrease of the production had a negative impact on tax collection. Thus, over 2009 the tax earnings in the federal budget in Moscow reduced by 8.4% and in the regional budget – by 9.3%. 

The experts have also noted the strengthening of the trend for evasion from taxes. According to the data that were supported by the deputy director of the RF Ministry of Finance Customs and Tariffs Policy Department S. V. Razgulin and public accountant of the RF Chamber of Accounts S. A. Agaptsov, the total number of short-lived companies registered in Moscow makes at present 75-80%. 

Simultaneously with the growth of the volume of evasion from taxes a sharp decrease of the number of instituted according to “tax” articles of the RF Criminal; Code. Thus, according to A. Ya. Kazakov, over three elapsed months of 2010 no more than 10 criminal proceedings were instituted in each of the majority of the RF subjects, and in some subjects, for instance, in Yaroslavl oblast, there are no such cases at all.

The following reasons for the existing situation can be outlined: 
- imperfection of legislation on the state registration and liquidation of legal entities, which allows the founders of short-lived firms to hold no responsibility;
- practice of comparatively mild punishment for tax legislation offenders (even if the arrears make several millions of rubles the accused are normally fined with sums of no more than several hundred thousand rubles);
- tax legislation offenders being not really interested in pre-court arrears payment. This reason results from the previous. Thus, in Moscow out of 166 tax criminal proceedings investigated the person under investigation compensated the damage only once and was exempted from criminal liability as a result;
- low quality of information materials rendered by the tax institutions to law enforcement bodies (usually they lack sufficient evidential base which should give court prospects for the case). As a result, according to the RF Ministry for Internal Affairs data presented at the round table, the proceedings are instituted only for 7% of the cases submitted to the Ministry for Internal Affairs from taxation bodies;
- lack of liability for tax bodies to conduct unplanned checks upon the demand of the law enforcement bodies and unwillingness to change the formed plans of checks on the basis of the data submitted by the RF Ministry for Internal Affairs;
- use of court complaints for decisions and actions of tax bodies to avoid institution of the criminal proceedings. Arbitrary courts make decisions on the basis of insufficient evidence collected by the tax body that has not got a right to conduct operational search actions. It should be noted that the recognition of a taxpayer’s righteousness excludes the possibility for institution of proceedings and prevents detailed evidential base from being collected.

Taking into account all the fact mentioned above it was concluded that the new system for calling the taxpayers for account does not work. The necessity to improve it was agreed upon even by the representatives of “Pepelyaev and partners” company, that traditionally protect the interests of taxpayers. However no particular suggestions on the ways for further reform have been made.

It was noted that at present public prosecution bodies are trying to solve the above-mentioned problems by issuing explanations (from March 3, 2010), which logic contradicts the logic of the Federal Law from 29.12.2009 No 383-FZ. The public prosecutor’s office in its clarifications bases on the fact that absence of amendments to the law on operational search activities allows law enforcement bodies to control taxpayers the same as earlier. As it was underlined by the participants of the round table, such an approach to solution of the problem based on the use on the unfinished nature of reforms is unacceptable, especially taking into account the fact that the procedure for operational search actions cannot be regulated in detail.

It seems that one of the optimal variants for solution of the existing problem if the model that was earlier suggested by IET experts, based on the refusal from the concept of taxpayers’ active repentance with the simultaneous refusal from their arrest as a  measure of restriction1 and from imprisonment as a sanction for tax offences. This would help to avoid the necessity to artificially lim it the authority of the law enforcement bodies when investigating tax offences, secure inevitability of punishment for the committed tax offences and considerably decrease the risks of corruption connected with groundlessly big choice between possible sanctions for tax offences2.

Kireeva A.V. – PhD,  Head of the Department of the Appraisal and Development of Normative-legal Acts,

1 Made by adoption of Federal Law from 29.12.2009 No 383-FZ.
2 Currently the taxpayer can be either imprisoned for up to 6 years or fined.