In Ukraine tax violations for 2008 -2010 will be penalized by fines of 2011
Adoption of the tax Code of Ukraine among other things raised an issue regarding which penalties are to- be applied to violations detected after the 1st of January 2011 within periods prior the moment when the Tax Code entered into force: those that are provided by the Tax Code or those that were provided by the legislation at the moment of their commitment. This issue became especially relevant after the 30.06.2011 when term of “one gryvnya fines” came to an end. This issue was settled by the Law “On amendments to the tax Code of Ukraine and some other regulatory acts of Ukraine aimed at improvement of some provisions of the Tax Code of Ukraine”. But tax payers are not likely to enjoy this settlement.
In accordance with new Subsection 11 of the Tax Code of Ukraine penalties which result from tax inspection will be imposed in the amounts provided by a law that is in force at the moment of such penalties imposition (including one gryvnya fines). Thus, taking into consideration the tree year term of limitation of actions that is set for tax violations, tax authorities that found out about a violation in 2011 and which was committed for the period after the August of 2008 must impose penalties provided by the current Tax Code and not by legislation that was in force at the moment of the infringement commitment. At the same time current penalties are significantly more severe than the previous ones.
Such approach to imposition of penalties contradicts provisions of Article 58 of the Constitution of Ukraine according to which laws and other regulatory acts do not have retroactive power unless they decrease or cancel liability. As one can understand based on the Decision of the Constitutional Court of Ukraine number 1-rp/99 dated 09.02.1999 the principle according to which a law does not have retroactive action means that a law or other regulatory act is to be applied to an event or fact that occurred when the act was in force. It is obvious that a violation occurs at the moment of its commitment and not at the moment when a decision about imposition of penalty for it is made. So any violation must result in sanctions that were in force at the moment of its commitment.
Actually the entire system of penalties application in criminal and administrative laws is built on this principle. But the legislator decided not to comply with the principle and put a taxpayer which violated the provisions of the Tax Code in position that is lower than one of a criminal!
How can one oppose against it? First of all based on Section 2 of Article 58 of the Constitution of Ukraine one can oppose against any attempts of tax authorities to impose penalties for violations that were not considered such or for which there existed no penalties at the moment of their commitment. By the way this was also confirmed by the State Tax Administration of Ukraine in its letter number 6319/6/12-0216 dated 31.03.2011. Secondly based on Section 1 of Article 58 of the Constitution of Ukraine and the mentioned Decision of the Constitutional Court of Ukraine one should stand for imposition of such amount of penalties which existed at the moment of wrongdoing commitment.
Of course the State Tax Administration of Ukraine will oppose against it. They will support their position by a reference to a provision that was previously in force – Section 2 of Article 11 of the Law “On system of taxation” in accordance with which sanctions that resulted from documentary inspections were to be applied in the amounts that were in force at the end of such inspections. But such arguments are similar to arguments of slave owners about righteousness of slavery because it has always existed. Additionally according to Article 8 of the Constitution of Ukraine its provisions including Article 58 are regulations of direct action.
This material was written by legal experts of law firm “Pravova Dopomoga” within practice of Taxation.
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