Sanctions tide of humanism

The government and the State Duma continue to amend legislation to reduce criminal pressure on entrepreneurs – according to the logic of the authorities, this can partly compensate for business problems due to sanctions. The bill of the Ministry of Justice on limiting the reasons for the arrest of entrepreneurs was adopted by the State Duma in the first reading. Soon, the parliamentarians will also receive a “second package” of easing – to mitigate the responsibility of business for tax crimes in the event of payment of arrears and penalties. Business and experts, supporting the liberalization of criminal punishment, propose to make it more ambitious – for example, to enshrine the principle of tax reconstruction in the law. Entrepreneurs and the Ministry of Justice intend to submit the next package of amendments in March.

The amendments to the Code of Criminal Procedure (CPC), adopted on February 22 by the State Duma in the first reading, are aimed at liberalizing the proceedings in criminal cases related to economic crimes. The bill affirms the priority of applying by the court against entrepreneurs and members of the management bodies of companies of preventive measures that allow them to continue doing business. Deputy Minister of Justice Andrey Loginov told parliamentarians that the number of applications for a preventive measure in the form of arrest of entrepreneurs in such cases is growing: from 118 in 2020 and 151 in 2021 to 149 in the first half of 2022 alone.

In the new structure, arrest in cases of economic crimes will be possible only in three cases: if the entrepreneur does not have a place of residence, has fled or violated a previously chosen measure of restraint. It will be possible to extend the terms of arrest and preliminary investigation only with the consent of the leadership of the regional investigative bodies. Investigative actions by themselves will not be considered sufficient grounds for extending the arrest.

In parallel with the adoption by the State Duma of amendments to the Code of Criminal Procedure, the government at a meeting on February 22 approved the second package of the Ministry of Justice on the humanization of criminal legislation: amendments to the Criminal Code (CC) are designed to mitigate punishment for tax crimes. If the entrepreneur pays all amounts of arrears and penalties, the investigator will be obliged to issue a decision to refuse to initiate a criminal case or to terminate an already initiated one. The reduction of the maximum sentence (from six or seven to five years in prison under Articles 199–199.2 of the Criminal Code, from four to three years under Article 199.4) transfers such crimes to the category of “minor and medium gravity” with a shorter statute of limitations. Previously, the procedure for initiating criminal cases for tax evasion was relaxed: investigators will be able to do this only on the basis of materials from the tax authorities about the possible presence of corpus delicti in the actions of the taxpayer (see “Kommersant” dated March 3, 2022).

“The fact that tax crimes will no longer be classified as serious entails not only direct, but also indirect consequences, namely, a significant expansion of the rights of the convict when considering issues related to the execution of the sentence (for example, the timing of applying for parole) ”, says business ombudsman Boris Titov. However, according to him, it is necessary to adjust the tax compositions in order to clearly separate crimes related to evasion from tax offenses and abuses.

Boris Titov also considers it necessary to include a note in the Criminal Code that would fix the obligation of the investigation to determine the amount of the arrears, taking into account the actual amount of the taxpayer’s expenses (the principle of tax reconstruction). “The Plenum of the Supreme Court in 2019 ruled that the courts must take into account all factors, both increasing and decreasing the amount of unpaid taxes, fees and contributions. However, at the pre-trial stage, these explanations are not always taken into account,” the business ombudsman notes. For example, according to Art. 199.2 of the Criminal Code, entrepreneurs are often attracted, even when the costs were justified, related to maintaining the activities of the organization and did not reduce its property mass. At the same time, both the criminalization of the act and its subsequent qualification primarily depend on the amount of damage.

Ekaterina Avdeeva, a member of the General Council of Delovaya Rossiya, notes that bringing the statute of limitations for tax compositions to the terms for storing documents will allow the entrepreneur to keep documents that prove that the interaction with the counterparty was justified.

Recall that the trend towards easing in the criminal prosecution of business was outlined after the start of the military operation of the Russian Federation in Ukraine – under the new conditions, the authorities promised more freedom in doing business. Unjustified harassment by the security forces has traditionally been cited as one of the main barriers to improving the business and investment climate. Therefore, business has already sent a number of additional initiatives to the Ministry of Justice to decriminalize economic crimes – some of them can be taken into account this spring.

Diana Galieva, Kristina Borovikova