World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version | Page 52

EXPERT OPINION
Initiation of criminal proceedings for
tax evasion: what it means and how
it threaten CEOs of large taxpayers
Criminal liability for tax evasion is a
burning issue. It has various dimensions
including personal liability, participation in
an investigation and, possibly, admission
of guilt. CEOs risk prosecution and may
be the target of an international search.
The number of criminal proceedings
initiated for tax evasion (data from
the Committee on Legal Statistics
and Special Accounts of the General
Prosecutor’s Office) is:
Risk of initiation of criminal proceedings
arises on completion of a tax inspection
with an assessment of at least $145,000
(approximately). Tax inspectors disregard
provisions requiring them to consider
intent. They simply transfer the “act of
inspection” to the economic crimes unit
(“Service of Economic Crimes” (SEC)),
which is within the Ministry of Finance.
Appealing against the tax assessment to
the Ministry of Finance and court does not
suspend registration of the criminal case.
• 2017 - 295 out of 42 018 tax inspections,
Dana Tokmurzina,
Director of Tax and Legal
Services Department, PwC
• 2016 - 463 out of 76 794 tax inspections
,
• 2015 - 677 out of 73 105 tax inspections.
The threshold of USD 145 000
(additional tax assessed following a tax
audit) for initiating criminal proceedings
places most large taxpayers at risk.
To compound the matter, initiation of
a criminal case after a tax inspection
happens almost by default.
2017 Amendments to the relevant Article
(245) of the Criminal Code (CC) were
largely ineffective. Arguably they made
conditions worse for compliant CEOs,
CFOs, and tax managers.
Bagdat Kuzhatov,
consultant of tax and legal
services Department, PwC
world monitor
We mention above that tax inspectors
disregard provisions requiring them to
consider intent and criminal proceedings
are opened by default. This makes the
situation even more difficult: the burden
of proof now falls on the individual who
is accused, rather than the inspector
who, in the first instance, should have
provided evidence of intent to evade tax.
Who is prosecuted for tax evasion?
In this article, we highlight some
very significant legal risks for senior
management associated with initiation
of criminal proceedings for tax evasion.
Initiation/registration of a criminal
case
50
It is important to note that initiation of
criminal proceedings is not connected to
a civil court decision (about the tax case).
A criminal case continues in parallel with
civil proceedings. Therefore, the taxpayer
will bear the not insubstantial costs for 2
proceedings (civil and criminal).
Tax declarations are authorised by the
electronic signature of the CEO. Related
to this, the criminal liability is imposed
on an individual, not a legal entity. Thus,
whoever signs the tax declaration(s) is
under risk, despite the fact that various