World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version - Page 53

EXPERT OPINION people may be involved (accountants, tax personnel etc). In short, the CEO bears the risk. Restrictions on CEOs during the investigation During the investigation the investigator may implement various restrictions on the CEO, e.g. a writ prohibiting the person accused from leaving a city or country. He may start an international search for the accused person in certain situations. (Kazakhstan is a member of the International Criminal Police Organisation and has signed a number of bilateral treaties on legal assistance and legal support in criminal cases.) The taxpayer’s access to information on criminal proceedings Even though the company is liable for the tax (allegedly) underpaid, management cannot obtain information about the status of the investigation as the company is not the subject of the criminal proceedings. Information is available only to the accused person and/or his/her advocate. This is problematic, especially if the accused person leaves the company. a difficult process and is associated with significant risk for the CEO. Release from criminal liability may occur at the pre-court stage or after a court decision. Pre-court (but during the criminal investigation) The 2017 amendment to the CC (mentioned earlier) involved a so-called note, which provides the grounds for release from criminal liability at any stage of proceedings (investigation or court hearings). Essentially the note states that if the tax assessment and associated penalties are paid, criminal proceedings are stopped. The key point, however, is that release on the basis of this “note” is on non-rehabilitation grounds only i.e. the accused person must provide the investigator with his/her written acknowledgement of conviction. The person involved, therefore, has a formal record on committing tax evasion (for 10 years in the General Prosecutor’s office). So the person’s (CEO’s) reputation is tarnished and it may cause difficulty in various situations in future obtaining a work permit, employment etc. Influence of a civil court decision After the decision of the court As mentioned, civil and criminal proceedings run in parallel. If the civil court decides (regarding the tax case) in favour of the tax authorities, this decision is taken as evidence of intent to evade tax. If the criminal court adjudicates against the person, he/she is recognized as a criminal subject to punishment, which may include imprisonment. Clearly if the court decides in favour of the person, there is no criminal record of any sort. However, the person concerned is certain to have had an unfortunate, unnecessary and probably traumatic experience. Closure of criminal proceedings Formally closing criminal proceedings and release from criminal liability is Conclusions The situation regarding criminal liability for tax evasion needs to be addressed urgently and on a systemic basis. Existing investors in Kazakhstan (and their management) are under severe threat, and this is a significant deterrent to new investment. This is not an idle threat: the probability of it materialising is high In the short-term, * existing investors must be aware of the risk and develop plans to cater for the risk materialising; * potential new investors in Kazakhstan must factor this into their decision- making; * systemic changes are required to the law urgently. These include changing / abolishing the $145,000 threshold, requiring tax inspectors and if relevant inspectors to consider properly the issue of intent, and making available information on criminal cases to all relevant parties (not just the accused). A final observation. The issue of criminal liability for alleged tax evasion highlights the absence of trust between the tax authority and taxpayers and, to a great extent, the belief of the authorities that all taxpayers want to evade tax. In an increasingly transparent world where companies are scrutinised by multiple stakeholders, in most cases this belief is not sustainable. A different approach to addressing the tax authority - taxpayer relationship needs to be considered. The Normative Decree of the Supreme court dated 18th of June 2004 # 2 «On some qualification issues of criminal offenses in area of economic activity» 1 supported by EUROBAK 51