Ukrainians who went through the capital amnesty procedure, declaring property and money and paying taxes on them at a preferential rate, were faced with an unexpected problem. They are increasingly coming to the attention of the Bureau of Economic Security: law enforcement officers began to understand the sources of origin of seemingly now officially legal funds and conduct searches.
At the same time, throughout the capital amnesty campaign, the authorities promised: those who “disclose” their funds and pay a percentage to the state will be able to continue to live in peace, but refuseniks should prepare for difficult times.
But now the situation is the opposite: citizens who trusted the state and decided to start living “the white way” were “let down the chain.” And those who did not declare or pay anything, on the contrary, do not have problems - at least for now.
“Many lawyers predicted such an outcome of the capital amnesty campaign even at the stage of adoption of the law on money laundering. It is written in such a way that it does not provide any guarantees to those “amnestied”. Moreover, it turns out that they themselves actually admitted that they had not paid taxes for many years. And they showed all their money and property. And now law enforcement officers even know the addresses to whom to go first. I think the list of those who will receive criminal cases instead of “forgiveness” will only expand,” says the head of the lawyer association “Kravets and Partners” Rostislav Kravets.
We looked into how the capital amnesty launched the flywheel of criminal prosecution of declarants.
Millions of hryvnias instead of a billion dollars
The capital amnesty campaign took place in Ukraine from September 1, 2021 to March 1, 2023. It was initiated by President Vladimir Zelensky, who announced it as a “unique opportunity” for citizens to legalize all their property: show money and assets, pay taxes on them at a preferential rate and “sleep peacefully.” And the head of the relevant parliamentary committee, Daniil Getmantsev, stated that participation in the tax amnesty will avoid difficulties when checking the legality of the origin of funds in the future.
Later, the Rada adopted a special law on this topic No. 1539-IX. It states that any citizen can submit a special declaration in which they must indicate income and assets on which taxes were not paid at one time. In such a declaration one could mention foreign currency savings, real estate, cars, planes, yachts, art objects, antiques, jewelry, shares in the capital of companies, corporate rights, and securities. Preferential tax rates were also prescribed: 2.25% for those who had already purchased government government bonds during the campaign, 5% for individuals who declared currency values and assets on the territory of Ukraine, 9% for property and assets abroad. For those who paid the fee not immediately, but in three equal installments, tax rates were higher - 3%, 6% and 11.5%, respectively.
It was initially envisaged that the capital amnesty campaign would end by September 1, 2022 (that is, it would last a year), but due to the war it was extended for another six months.
However, it still did not give the expected effect. As the head of the relevant tax committee of the Rada, Daniil Getmantsev, wrote in his telegram channel, “as of March 1, 2023, 845 declarations were filed, the total amount of declared assets is UAH 8.82 billion. The total amount of the declared fee is 547.5 million hryvnia.”
That is, the budget received only a little more than half a billion hryvnia in taxes, although initially Prime Minister Denis Shmygal expected “at least billions,” and at the stage of preparing the amnesty bill they said that $20 billion worth of property would be used for legalization, and the budget would receive about a billion dollars .
According to Getmantsev, at the end of the campaign - two weeks before the end - people became more active, declared property worth 2.6 billion at once, that is, they contributed almost a third of the volumes “exposed” over a year and a half. And “many people did not have time to take advantage of the unique opportunity.”
Getmantsev himself explained the actual failure of the capital amnesty campaign by several factors.
Firstly, war.
Secondly, “a kind of competition for the amnesty was the preferential tax regime with a single tax at a rate of 2%” (it was introduced at the beginning of the full-scale Russian invasion, but has already been cancelled).
But there were other factors that explain the failure of the campaign.
Even at the stage of discussing the tax amnesty bill, both businessmen and many lawyers talked about the pitfalls: it would not happen that people who trust the state and pay taxes will only make things worse for themselves and come to the attention of law enforcement officers.
“The bill was written in such a way that it actually did not give any guarantees to declarants. It allowed you to declare assets and pay taxes. But he did not guarantee that no questions would arise regarding these funds in the future. Although many amendments were submitted to the draft, vague wording was retained in the final version,” Kravets tells us.
In part, this explains the caution of many citizens who chose not to declare anything and not pay taxes. And as practice shows, their instincts did not let them down.
Actually turning himself in
Literally a few months after the end of the capital amnesty campaign, law enforcement officers began visiting Ukrainians who had filled out declarations and paid taxes.
Several businessmen immediately told Strana that they went through the amnesty procedure and paid interest, but now the Bureau of Economic Security has questions for them. The BEB began to investigate the legality of the origin of the “amnestied” funds, the courts are issuing search warrants, people are waiting for suspicion and feel deceived.
When asked how this could be, Getmantsev replied that he was “surprised” and had not heard of such precedents. Apparently no one approached him with such complaints. And he urged people to complain to him personally in order to deal with each specific case.
The lawyers we spoke with say there is still a problem and call it “expected.”
“What happened during the capital amnesty campaign? In fact, those who went through the procedure, firstly, showed all their property (which without this it is not certain that they would have been found), and secondly, they admitted that they had been evading taxes for years. This is actually a confession. The amnesty law guarantees such people exemption from fines and penalties for non-payment of taxes in previous periods. And it's all. In turn, the BEB can raise the question of the legality of the origin of funds already amnestied and begin to dig in this direction, come with searches, seize documents, involve other persons as part of the investigation, for example, if the declaration included a share in the business, then the company’s management and accountants . Such persons may face Article 212 of the Criminal Code, which provides for serious fines and even confiscation of property,” Kravets explained to us.
However, paragraph 6 of Article 212 of the Criminal Code states that tax evasion is not considered intentional if the assets were indicated in the declaration and went through the amnesty procedure, but only in cases where such acts (tax evasion) were carried out before January 1, 2021 and were associated with the acquisition (creation) of the object of declaration.
That is, as part of the campaign that began on September 1, 2021, the funds with which the declarant then purchased property were “forgiven” only until January 1 of this year. And if traces of funds from which taxes were not paid are revealed later, it turns out that questions may already arise for the declarant.
For example, those who declared real estate or cars in February of this year, shortly before the end of the campaign, must now be prepared to account for the money with which they bought it all.
“They may ask about the sources of funds, especially “fresh” assets, and charge additional taxes if they were not paid at the time, but not at a preferential rate, but at the full rate. I think the number of such cases will only grow, since they are quite simple for the BEB, because there are even addresses where you need to go. In addition, if people themselves have already admitted that they have not paid taxes for years, a reasonable question may arise as to what and where else they have violated, so such citizens may be subjected to various inspections,” says Kravets.
He also added that he does not advise Ukrainians, who are now approached by law enforcement despite the capital amnesty, to try to “resolve issues.”
“It is clear that many will start looking for connections and offering money in order to avoid litigation. But I don’t recommend it, they might also attract you for giving a bribe. It’s worth going to court and trying to play on the mistakes in the work of the BEB (and the evidence base, as practice shows, is often very weak, there are many procedural violations),” says Kravets.
“By carrying out a one-time (special) declaration of assets, the state provided declarants with guarantees and exemption from liability for certain violations of the law, in particular, non-payment of taxes. Thus, information from special declarations and the documents attached to them are subject to a special regime of confidentiality and access to them, and for the disclosure of the latter, legal liability is applied to those responsible.
As a general rule, these declarations cannot be used as evidence in criminal, civil and administrative cases. Therefore, cases of using information from special declarations not only undermine trust in the state, but also raise questions regarding possible violations of the confidentiality regime and bringing individuals to justice. It is also possible to raise the issue of admissibility of evidence and other information obtained on the basis of the mentioned documents within criminal proceedings. At the same time, it is worth mentioning the practice of the European Court of Human Rights, which was also supported by the Grand Chamber of the Supreme Court and formed legal conclusions taking into account the doctrine of the “fruit of the poisonous tree”: “if the source of evidence is inadequate, then all the evidence obtained with its help will be the same,” Ivan Marinyuk, head of the tax law practice at the law firm Ilyashev and Partners, tells Strana.
