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What To Do With Large-Scale Tax Evaders?

Failing to pay taxes, especially if the unpaid amount is large enough, could demand a criminal investigation. Police usually find out about such tax evasion via the tax authorities, who are required to hand over any applicable materials to them in such situations. The Federal Tax Service outlines what actions should be undertaken after these materials are submitted to the police for investigation in Letter #SHT-22-2/174@, dated 03-11-10.

Federal Law #383-FZ, dated 12-29-09, went into force on January 1, 2010. It significantly increases the amount of back taxes a taxpayer needs to accumulate before incurring criminal responsibility. This law changes Point 3 of Article 32 of the Tax Code which requires the tax authorities to give the police any pertinent information regarding those suspected of large-scale tax evasion. Under the new law, taxpayers who fail to pay arrears within two months after the deadline for doing so may be suspected of tax evasion. Moreover, violation of this requirement could carry the threat of legal consequences (Point 3, Article 32 of the Tax Code).

At the same time, the interagency instructions* which regulate the process for submitting materials to the police do not specify that the basis for giving this information to the police must be tax evasion; charges of tax evasion can be determined only by a decision to prosecute. Because of this, the FTS has warned their employees that they should follow the provisions in the Tax Code and not the interagency instructions. For example, if a demand for materials is made in a case that is not being criminally prosecuted, then there should not be any police involvement.

The tax inspectorate should suspend judgment on prosecuting the citizen in order to recover all applicable taxes, fines, and penalties before sending the related materials to the police. It should then wait to see what the review of the materials uncovers. There are two possible ways the situation could develop: the first scenario could be that criminal charges are not brought (or else brought, but then dropped or the taxpayer is acquitted).  If this happens, the tax authorities then resume implementation of their own decisions and recover the back taxes themselves. The second scenario would be that the investigation finds that the citizen is guilty of tax evasion, in which case the tax inspectorate should go forth with its decision to prosecute (as it pertains to the citizen’s tax responsibilities). Each of these punishable actions is outlined in a separate document, copies of which must be given to the taxpayer within five days (Point 15, Article 101 of the Tax Code, as amended on 12-29-2009).

* Approved by Joint Order #495/MM-7-2-347 of the MID and the FTS on 06-30-2009.

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