The Internet newspaper publishes opinions given by participants of the seminar “Inspections by law enforcement and tax authorties” in an article titled “Just pay taxes and feel free to land in jail?”

12 April 2010

The law on mitigation of punishment for tax crimes, which was adopted three months ago actually does not work as of yet. Law enforcement agencies consider it possible to investigate criminal cases, even when tax administration has no complaints against the tax payer any more. According to law enforcement agencies, any different interpretation of the law can lead to anarchy and refusal to pay taxes.

Amendments which become effective since January, 1 of this year, were meant to put into practice repeated appeals of Russian President Dmitry Medvedev to stop “tax terror” and to cease “nightmaring” business. To begin with, amendments stipulated that people accused of tax dodging cannot be penalized by detention. The size of non-payed taxes which may be regarded as a criminal offence was increased several times. The most important thing is that citizens who committed such deeds for the first time (including directors of companies) were discharged from responsibility – of course, if they undertook to settle their debts to the state – to pay taxes, penalties and fines.

Authors of the law deemed necessary to give up on punitive system. As the deputies of “Edinaya Rossiya” specified in an explanatory note: “It appears that, when addressing an issue of bringing someone to responsibility, the state is interested in maximum amount of taxpayers fulfilling in good faith their obligations, rather than landing in jail; as for the cases when a taxpayer has already committed fiscal offence, all the losses incurred by the state should be compensated. Put this another way, legal responsibility should not degenerate into reprisals against tax payers, it should promote correction of offenders, and consequently, maintenance of fiscal revenue”.

Poena sine culpa

However, law enforcement agencies do not agree with such liberalisation, and they had a say on the matter during a separate seminar. According to Maria Yermolina, head of directorate of field audit of the Tax Crimes department of the Central Directorate of Internal Affairs of St.-Petersburg and Leningrad Region, it can result in anarchy: “Our tax bearers can, after due deliberation, declare “Why should we pay taxes? We have an inspection every three years, they use to make calculations, then we pay taxes specified (by the inspection team) within the legal period, that's about it. And according to the new legislation, they are released from responsibility, including criminal one”.

Interaction between tax and law enforcement agencies is the most sensitive issue. Historically, it were tax collectors who de facto initiated criminal prosecution of tax dodgers, but now inspectors make reference to the Criminal Procedural Code of the Russian Federation, and maintain that they are completely independent. According to Oleg Kosatenko, the deputy chief of division of Main Investigations Directorate of GUVD of St.-Petersburg and Leningrad Region, to initiate a criminal case one “does not need any report by tax office”. A case may be investigated irrespective of whether the tax inspection identified some offences or not. To establish particular facts, an inspector can schedule a tax analysis, however, he is under no obligation to do so.

Their opponents strongly oppose such attitude. According to Vladimir Alyoshin, chief adviser on penal matters in the law firm S&K Vertical, no criminal case can be initiated without a valid decision by tax agency, which confirms the fact of tax evasion, because there is no criminal event. He also challenged quality and objectivity of tax analyses scheduled by investigators.

Moreover, law enforcement agencies intend to disobey not only they colleagues from tax agencies, but the court as well. According to Oleg Kosatenko, for instance, should the arbitration court recognise that a company has paid taxes in full and committed no offence, criminal case against its director may still progress! Vladimir Alyoshin reminds policemen of their beloved letter of procedural code: “Any circumstances established by a judgement which has entered into legal force, adopted within the limits of civil, arbitration or administrative procedure, shall be accepted by court, public prosecutor, inspector, investigator without additional checking”.

Aleksey Kulikov, managing partner of “Agentstvo nalogovykh poverennykh” (former officer of the Tax Crimes Administration) partly agrees with representatives of law enforcement agencies: a criminal investigation can be opened without decision of taxmen, however, should the arbitration court found taxes paid, the investigation shall be closed. Why does one need to investigate two cases in parallel, imposing limitation on director’s freedom (recognizance not to leave being the most lenient measure of restraint) remains unclear.

According to Vladimir Alyoshin, law enforcement agencies, due to their departmental interest, tend to construe the law in favour of punitive measures whereas Dmitry Medvedev spoke about liberalisation. The lawyer is convinced that “One should not assume that everybody wants to commit fraud and avoid to pay taxes. One should trust instead of punishing”.

They’ll take it all

Another “antinightmarizing” law which regulates inspection procedures applied to small enterprises has been in force for nearly one year. However, it doesn’t cover taxmen raids and investigative or other activities of police.

Lawyers of business entities lay emphasis on issues pertaining to document delivery on request of law enforcement agencies, as well as on document suppression procedures. Maria Yermolina, referring to legislation, explains that the respective agency should, during suppression of documents, immediately make attested copies, and should it be impossible they shall supply copies to the owner of documents within five days. In any case departmental officers should make an accurate inventory.

However, according to all interviewed lawyers, these norms are ignored by law enforcement officers: they usually pile documents in a box and carry them away along with PC system units making no inventories, thus frequently paralyzing activity of a company. It would be useless to argue with armed men, let alone to fight them. The most recent case: officers of the Directorate for Combating Economic Crimes required of travel agency to provide them with personal information of some clients; they draw no reply, then withdrew documentation, computers with databases, client-bank system, etc.

Oleg Kosatenko does not deny that such practice is at least an infringement of laws on commercial secret, which is only accessible with the permission of the court. He also encourages businessmen to file complaints, the policemen is sure that: “We are living in Russia, and are very lucky in this sense. The advantage of living in Russia is that you may well file a complaint practically anywhere, be it the fire inspection or Commissioner for Children's Rights, and they must receive this complaint”. However, its opponents maintain that as a rule such complaints are practically ineffective.

The same applies to solicitation of documents– some law-enforcement agencies and other authorities often request to provide them with all contracts with a specific firm, other materials etc.! According to Oleg Kosatenko, a company must respond to any request to “provide all the accounting reports, including supporting primary documentation for 10 years”. However, as he said, a company may recover expenditures connected with copying from the state through legal enforcement procedure. But businessmen are not authorised to ask police questions as to the purpose of document suppression. Maria Yermolina is sure that “If they make a request, then there is some valid reason for it”.

Vladimir Alyoshin lays emphasis on the fact that law enforcement agencies tend to apply double standards. He proves up on a document concerning non-payment of taxe on sale of some 50 million tons oil by the state company Rosneft (which obtained assets of Ukos); criminal complaint was dismissed because the chief security officer found it inappropriate to provide law enforcement agencies with the documents they requested.

For reference

From January 1, any citizen-tax payer can be brought to trial, if he dodged taxes to the amount exceeding 600 000 roubles for three years in a row. Any businessman can be brought to trial if the sum of taxes payable of his company exceeds 2 million roubles.

Back to the list