Taxpayers’ guilt-based liability is suggested to be introduced

Taxpayers’ guilt-based liability is suggested to be introduced

The Ministry of Finance developed the Draft Law “Improvement of Mechanisms of Liability for the Violation of Tax Regulations”.
The goal of the draft law is to reform and to update liability for the violation of tax laws. It contains more new mechanisms for the settlement of tax disputes for taxpayers in cases, when they are not responsible for detected tax violations.
Along with the definitions of tax-related corpus delict, it is proposed to introduce the principle of “guilt-based liability” for taxpayers replacing the current principle “no guilt liability”. The Draft Law is proposed to be implemented following the concept of “mindful care”.
As per the proposed law, a taxpayer shall be considered guilty of a tax violation, if it is proven that it was possible for him/her to follow rules and norms whose violation is subject to sanctions in accordance with the Tax Code of Ukraine, but he/she did not take sufficient steps to ensure the required compliance. Due to this, controlling authorities should be entitled to additionally examine the documents of a taxpayer confirming his/her mindful care.
Also, it is proposed to apply a system of mitigating factors and circumstances releasing from responsibility; this would allow to hold taxpayers liable for violations resulting, for instance, from the malfunction of the electronic tax reporting system.
Along with detailed regulations for the compensation of the illicit decisions of controlling authorities, the Draft Law also proposes a simplified procedure for this compensation. If a taxpayer whose rights were violated, has some problems proving the sum of damage, he/she can receive some fixed compensation sum.
The legal nature of delay penalties is proposed to be changed as well from a sanction tool to a tool meant to compensate the loss of the value of money in time.
Also, the Draft Law significantly extends requirements to the content of the tax authority notification-decision. It must contain a detailed description of the relevant circumstances which shall be properly proven as well as proper reasons of the respective controlling body to apply sanctions to a taxpayer (source: Government Portal).
As to “SDM Partners” Law Firm, such initiative falls beyond liberalization and deregulation vectors determined by the Government several years ago.
Moreover, the obligation to prove “sufficient measures”, “mindful care”, etc. shall be borne by the fiscal authorities, but appear to be very subjective, giving another levers of influence for business, as well as abuse by fiscal authorities. Also, there is no procedure allowing the taxpayer to prove all the measures within his/her control had properly been undertaken.