Weekly analytics for 2 – 8 February 2021

Liability for fraud is already provided for in the Criminal Code, there is no need to envisage it again

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Event

On February 3, the Verkhovna Rada adopted in the first reading the draft Law on amendments to the administrative and criminal legislation on the establishment of the Bureau of Economic Security of Ukraine (No.3959-1).

The above amendments, in particular, provide for the following:

1) a significant increase of the penalty for intentional evasion of taxes, fees, payments in particularly large amounts (Part 3 of Article 212 of the Criminal Code of Ukraine, hereinafter – the CC) – for this crime a basic punishment is envisaged of imprisonment for up to seven years (currently it is punished by a fine). Particularly large is the amount of actual non-receipt in the budgets or state trust funds of costs in the amount of seven thousand and more non-taxable minimum incomes (hereinafter – nmi) (from January 1, 2021 it is over UAH 7,945,000);

2) the CC is supplemented by a new Article 222-2 “Fraud with value added tax”;

3) disclosure of a trade or banking secret (Article 232 of the CC) is transformed from a criminal offense again into a crime – by raising the upper threshold of the fine for this act from three to five thousand nmi;

4) Article 382 of the CC establishes liability for intentional non-compliance with the decision of the investigating judge, and Part 4 of this article specifies that criminal liability arises only for intentional non-compliance by an official of the final, and not any decision of the European Court of Human Rights. ECtHR).

CPLR assessment

1. Increasing penalties for intentional evasion of taxes, fees, payments in particularly large amounts is aimed mainly at the “sharks” of business and this could be welcomed. If we do not take into account that in 2001-2011 the sanction of Part 3 of Art. 212 of the CC provided for the main punishment exclusively in the form of imprisonment for a term of 5 to 10 years, but such punishment, even in the absence of alternative punishments, was applied only to 10-15% of convicts; if there is an alternative punishment in the form of a fine in the sanction, the courts will apply imprisonment only in order to release the convict from serving the probation sentence. Therefore, the convicts will not even pay a fine of UAH 255 to 425 thousand. Therefore, it would be more effective in this case to impose imprisonment combined with a fine as an additional punishment. After all, in accordance with Part 3 of Art. 53 of the Criminal Code, a fine as an additional punishment may be imposed only when it is specifically provided for in the sanctions of the article (sanctions of part of the article) of the Special Part of this Code.

2. Article 222-2 of the CC, as can be understood from the extremely unfortunate style of its text, provides for liability for the following acts: a) embezzlement of budget funds by obtaining budget compensation, b) illegal misappropriation of budget funds by obtaining budget compensation, c) filing a claim for return of the amount of budget reimbursement – if they are made by submitting knowingly false information, including as a result of using a knowingly forged document.

However, there is no need to supplement Article 222-2 of the Criminal Code.

First, the embezzlement of budget funds or their illegal acquisition by submitting knowingly false information is the same as the seizure of property by fraud, liability for which is now provided in Art. 190 of the CC “Fraud”.

Second, it is unclear how embezzlement differs from illegal acquisition of budget funds, because it is essentially the same thing, and “illegal acquisition” is nonsense, because it is impossible to legally acquire by submitting knowingly false information.

Third, the filing of a claim for refund of the amount of budgetary reimbursement  can be considered only as an attempt to fraudulently seize state property – actions directly aimed at committing a crime, if the crime was not completed for reasons beyond the control of the person (see Article 15 of the CC), for example, because the supervisory authority, in accordance with paragraph “b” of Art. 200.14 of the Tax Code, has sent a tax notice to the taxpayer, in which it stated the grounds for refusal to provide budgetary reimbursement.

Fourth, the submission of knowingly false information, including the use of a knowingly forged document under the current CC may be qualified under Part 4 of Art. 358 of the CC or, if this act is committed by an official – under Art. 366 of the CC.

3. There is no need for any change in the penalty for disclosing a trade or banking secret. After all, during the entire existence of this article in the CC, no person has been convicted for this act.

4. Amendments to Article 382 of the CC are justified. In particular, as is well known, in addition to final decisions, the ECtHR may also decide on an amicable settlement or on the approval of the terms of a unilateral declaration, including in the case against Ukraine. However, according to Article 2 of the Law of Ukraine “On Enforcement of Judgments and Application of the Case Law of the European Court of Human Rights”, the decision of the ECtHR is binding on Ukraine in accordance with Article 46 of the Convention for the Protection of Human Rights and Fundamental Freedoms. According to this article of the ECHR, entitled “Binding force of decisions and their execution”, the High Contracting Parties undertake to comply with the final decisions of the Court in any case to which they are parties. The Committee of Ministers of the Council of Europe supervises the implementation of the final decision of the Court. If the Committee of Ministers considers that the High Contracting Party refuses to comply with the final decision in the case, it may apply to the Court for compliance by that Party, and if the Court finds a violation, it refers the case to the Committee of Ministers in order to identify measures that must be taken.