Criminalization of Tax Offences: Ukraine vs Poland

Ukraine, being a country that was granted a candidate status for EU membership, is currently on its path towards harmonization with the European legal framework. One of the key steps on this path is the adaptation of Ukrainian legislation to the EU Acquis Communautaire, which is a cumulative body of EU laws, binding to all Member States. 

Criminalization of tax offences is an essential element of this adaptation. Its key purpose is to ensure financial stability of the States, to protect economic interests of the societies, and sustain a just tax environment.

Historical Context and Evolution of Legislation

Ukraine and Poland build on similar historical legacy, yet their approach to legal regulation varies significantly due to both the different pace of economic development, and the distinct legal tradition. 

In Poland, the history of criminalization of tax offences dates back to the interwar period. The modern Polish approach to tax crimes draws upon a deeply rooted tradition of strict control over the fulfilment of tax obligations, which became even more relevant after the country’s accession to the EU in 2004. 

In contrast, the establishment of tax legislation in Ukraine began after the country declared independence in 1991. Before the 2010s, the Ukrainian tax administration was relatively weak, which allowed many businesses to avoid paying taxes without facing serious consequences. However, after the EU-Ukraine Association Agreement, as well as in response to pressure from international organizations, Ukraine began to actively reform its tax legislation. In 2021 the establishment of the Economic Security Bureau, which took on the role of combating tax crimes, marked a significant breakthrough in this respect.  

Tax Administrations and Tax Investigation Bodies

Combating tax crimes depends upon the effectiveness of the tax administrations and law enforcement agencies. 

In Ukraine the tax control roles are divided between several governmental agencies, the two key of them being the State Tax Service of Ukraine (DPS) and the State Customs Service of Ukraine (DMS). Their primary task is to ensure proper accounting of taxes and customs duties, as well as identification of tax evasion cases. For purposes of combating tax crimes, the Economic Security Bureau of Ukraine (BEB) was established. It is a rather new authority, which took on the functions previously shared among several other bodies, allowing for centralized and more effective investigations.

In Poland the system of tax control and investigations is more structured and regulated. The primary body responsible for overseeing compliance with the tax legislation is the Ministry of Finance, that has specialized units for combating tax crimes. The Polish Penal Fiscal Code clearly defines the roles and responsibilities of these units, allowing them to respond promptly to detected violations. Additionally, the Central Anti-Corruption Bureau (CBA) is in place, which, apart from corruption crimes, deals with major tax offences that have a significant impact on the state budget.

Classification of Tax Crimes

Effective tax crimes combatting needs a clear classification of such crimes. 

In Ukraine tax crimes can be roughly categorized into six main groups (as per the provisions of the Criminal Code of Ukraine/ “CCU”):

1. Crimes associated with violations of regulations governing specific types of business activities (Article 213 CCU). These include operating a business without the necessary licenses or permits.
2. Crimes involving violations of established procedures for the production and use of specific types of goods (Article 204 CCU). These include illegal production, storage, sale, or transportation of escise goods.
3. Unlawful termination of business activities aimed at avoiding tax payments (Article 219 CCU). This crimes includes making bankrupt for purposes of tax evasion. 
4. Tax crimes in specific areas of business activitiesi (Articles 212, 209 CCU). The most common of these offences are tax evasion, fees evasion, and money laundering.
5. Crimes related to foreign economic activity (Article 201 CCU), for example, smuggling.
6. Crimes aimed at avoiding tax payments through the unjustified receipt of tax benefits (Article 222 CCU), including fraudulent financial transactions.

The Polish Penal Fiscal Code introduced four basic categories of the tax crimes:

1. Crimes against tax obligations and settlements in respect of grants or subsidies. Those include: failure to disclose the subject or tax base, the tax fraud, non-payment of the tax settlements, no book-keeping or wrongfully book-keeping, and fraudulent tax refund. 
2. Crimes against customs duties and rules of foreign trade in goods and services. Those include: violation of customs rules, illegal export or import of goods.
3. Crimes against foreign exchange. Those are defined as violation of currency legislation, illegal foreign currency transactions.
4. Crimes against organizing gambling games. These mean illegal organization of gambling, which can also have tax consequences.

Statistically, in Poland most of the tax crimes fall under the first category. This indicated a high attention to ensuring the proper implementation of tax obligations.

Criminal Liability Triggers

Criminal liability for tax offences applies in case a certain threshold is reached. Such thresholds differ in Ukraine and in Poland.

Ukrainian legislation provides for an amount of underpaid tax liabilities, which if exceeded triggers criminal proceedings on tax evasion. This amount is constantly updated, allowing to adapt the legislation to changes in the national economy.

The Polsih legislation distinguishes between two categories of tax crimes, namely minor offences and criminal offences.

A minor offence is defined as one where the tax amount involved does not exceed five times the minimum wage specified in the law at the moment of committing the act. As of July 2024, this threshold amount to PLN 21.500 (~EUR 5.035). In turn, a criminal offense is defined as one that provides for more serious consequences depending on the amount of damages inflicted, namely fine, restriction of liberty or imprisonment.

In case of tax fraud, being the most reported tax crime, the maximum penalty in Poland 720 fine rates or imprisonment, or both. In cases when the tax assessment is of a "small value" (the amount involved does not exceed 200 x the minimum wage), the maximum penalty is 720 fine rates. This system allows to make the liability strictly dependable on the gravity of the crime committed.

Decriminalization and Self-disclosure

One of the important elements in combating tax crimes is the possibility for taxpayers to voluntarily correct error without facing criminal liability.

Ukrainian law allows for the voluntary submission of an amended tax return prior to a tax audit or before the criminal proceedings are initiated. Doing so prevents the triggering of criminal proceedings. To avoid criminal charges, the taxpayer must fully pay the underpaid taxes along with any applicable penalties and interest for late payment.

The Polish Penal Fiscal Code contains a similar provision. This mechanism allows taxpayers to avoid serious consequences subject to self-disclosure. However, this mechanism applies only if the tax offence has been documented by law enforcement authorities or proceedings are opened.

In practice, in Poland voluntary self-disclosure is permitted in the following cases:

• Late submissions of tax declaration.
• Inaccurate book-keeping.
• Miscalculation of taxes.
• Erroneous application of reduced VAT rates.
• Underreporting of actual business activity volumes.

Tax Crimes and the Statute of Limitations

The statute of limitations periods is an important element of the legal regulation of tax crimes. After these periods the offender cannot be held accountable.

In Ukraine, the general limitation period for tax liability is 1,095 days, and 2,555 days for transfer pricing purposes. Should a tax return have not been filed, the period of limitations does not apply, providing the tax administrations with more control mechanisms. Furthermore, if criminal tax evasion charges were to be pressed, the limitation period could be extended to up to 10 years, depending on the gravity of the offence.

In Poland, different statute of limitations periods apply depending on the gravity of the offence. For criminal offences they are as follows:

• 5 years: If the maximum penalty for a crime is a fine, restriction of liberty, or imprisonment for up to 3 years.
• 10 years: If the maximum penalty for a crime exceeds 3 years of imprisonment.

 For minor offences, the statute of limitations is 1 year.

In all of the three cases above, the said periods can be extended by an additional 5, 10, or 2 years respectively, if charges are brought against the suspect.

The statute of limitations is suspended if a tax offense has been documented by law enforcement agencies or an investigation has been initiated.

Liability for Tax Crimes

Both Ukrainian and Polish criminal law establish similar types of liability for tax crimes, which depend on the gravity of the crimes.

In Ukraine, tax crimes are punishable by fines, a prohibition on occupying certain positions, confiscation of property, and imprisonment. It should be noted, that the amounts of the fines, as well as imprisonment terms, depend on the extent of damage inflicted.

In Poland, liability for tax crimes is regulated by the Penal Fiscal Code. Minor offences may be punishable by fines, while more serious tax crimes can lead to imprisonment. The maximum penalty may also include confiscation of property, which aims not only at punishing the offenders, but also returning illegally obtained funds to the budget.

Conclusion

Criminalization of tax offences is a crucial component in maintaining financial stability and promoting economic development in both Ukraine and Poland. While each country has specific approaches to regulating tax offences, they both aim to establish a fair tax environment and enhance taxpayer accountability.

For Ukraine, adapting to EU standards is both a necessity and an important step towards integration in the European community. Meanwhile, Poland, being an EU Member State, demonstrates a high level of effectiveness in combating tax crimes, setting an example for Ukraine in refining its own legislation.

Therefore, Ukrainian entrepreneurs operating in Poland or seeking to expand in the European market, must understand the serious consequences of tax violations, which may significantly differ from those in place in Ukraine. Compliance with tax laws is a responsibility shared by both the government authorities and individual taxpayers. The latter is obliged to diligently adhere to the regulations and meet their obligations to the state in a timely manner.