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