The statute of limitations for tax crimes for businesses proposed to be reduced

On February 21, 2023, the President stated that he considers it “right to return to the issue of revising a number of norms of criminal law in terms of the so-called economic offenses.” “Of course, the state must control what is happening in this area, permissiveness cannot be allowed here, but there is no need to go too far either. It is necessary to move more actively towards this decriminalization, which I spoke about. I expect that the Government, together with the Parliament, law enforcement agencies, business associations, will consistently and thoroughly carry out this work,” he continued.

Which norms of the Criminal Code can be decriminalized, that is, transferred from the category of criminal offenses to administrative ones, was not specified. It remains to wait for the list of instructions following the results of the message. True, the experience of recent years does not allow us to expect rapid and significant progress in this direction.

The bill that the government has submitted to the State Duma now was also developed in pursuance of President Putin’s order, but dated April 26, 2022 “in order to reduce the negative consequences for the Russian economy in modern conditions,” the explanatory note says. That order, almost a year old, ordered the government, together with the Supreme Court, the Prosecutor General’s Office, the Investigative Committee, the Presidential Administration and with the participation of the Delovaya Rossiya public organization, by June 1, 2022 (!!!) to “ensure the introduction” of amendments to the laws that would provide for the release from criminal liability for “crimes related to tax evasion and other obligatory payments, subject to full payment of arrears, penalties and fines”, as well as reduction of the statute of limitations for criminal liability for such crimes.

The statute of limitations, that is, the number of years from the moment the crime was committed, after which the citizen is released from criminal liability, in our Criminal Code depends on the category of crimes. Two years – if we are talking about crimes of minor severity, where the maximum punishment does not exceed three years in prison. Six years – if we are talking about crimes of medium gravity, where the maximum punishment does not exceed five years in prison. Ten years – if it is a serious crime with a maximum penalty of up to 10 years in prison. And, finally, 15 years – for especially serious crimes, for which you can get more than 10 years in prison.

So, in order to reduce the statute of limitations for a number of tax crimes, the government proposes to reduce the maximum penalties for them. The text of the bill lists four articles of the Criminal Code. Article 199, which punishes an organization for evading taxes, fees or insurance premiums, still promises up to six years in prison, which is a serious crime, and the statute of limitations for it is ten years. Reducing the maximum sentence to five years would move the crime to the category of medium-gravity crimes with a statute of limitations of six years. The government wants to do the same with article 199.1 of the Criminal Code (failure to fulfill the duties of a tax agent for personal purposes), and with article 199.2 (concealment of funds or property of organizations or an individual entrepreneur, at the expense of which taxes, fees and insurance premiums are collected), moreover, in in the latter case, the maximum term of imprisonment is reduced by two years at once, from 7 years to 5 years. And, finally, the organization’s evasion from paying insurance premiums to the Pension and Social Insurance Fund and the Compulsory Medical Insurance Fund on an especially large scale, for which Article 199.4 of the Criminal Code still promises up to four years in prison (this is a medium-gravity crime with a statute of limitations of six years) it is supposed to turn into a crime of minor gravity with a statute of limitations of two years, reducing the maximum term of imprisonment to three years.

There have long been reservations to some of these articles of the Criminal Code: they say, if a crime is committed for the first time, and the accused himself repaid the debt and paid the fines prescribed by the Tax Code, he is completely exempted from criminal liability. The Government has now found it necessary to clarify this wording by amending the Code of Criminal Procedure.

The Supreme Court, as follows from the official response, no comments. The bill was agreed with the Ministry of Economic Development, the Prosecutor General’s Office, and the Business Russia organization. According to MK, the Ministry of Finance and the Investigative Committee were against it. The financial department, in particular, believed that reducing the statute of limitations from ten to six years would make it impossible to bring those responsible for tax evasion to liability in cases where the amount of damage they caused to the budget was significant: from the moment the crime ended to the transfer of documents to the UK due to for long periods of field tax audits, sometimes it takes up to five years, and this is already on the verge of the expiration of the reduced statute of limitations …

The specialized Duma Committee on State Construction and Legislation has not yet begun to consider this government initiative. On the other hand, on February 22, in the first reading, the State Duma supported another bill “for businessmen” introduced earlier. Deputy Minister of Justice Andrey Loginov reminded the deputies that it was prepared in pursuance of another order of the President, given in July last year following the results of the St. It is proposed to oblige the court to choose such a measure of restraint against an entrepreneur accused of crimes of an economic nature, which will allow him to continue to manage the business. That is, it should not be a pre-trial detention center and not house arrest, apparently. Detention is allowed only if the citizen does not have a permanent place of residence, or has violated the previously chosen milder measure of restraint, or has fled. The extension of the period of detention and the period of preliminary investigation in respect of a businessman will be possible only with the consent of the head of the investigative body of the region, and when requesting an extension of arrest, it is prohibited to refer only to the need to conduct investigative actions without presenting other arguments. The first deputy head of the Committee on State Building and Legislation, Irina Pankina (ER), recalled that this bill is “just in the context of the president’s message,” which said that “in the face of sanctions pressure, it is very important to reduce the risk of criminal prosecution of our domestic entrepreneur.”

We are talking about all categories of business – and small, and medium, and large, explained, answering the questions of the deputies, Mr. Loginov. According to him, “in fact” there are not so many applications for a measure of restraint in the form of detention against violators of those about two dozen economic articles of the Criminal Code in question, but the trend is “increasing”: according to statistics from the Judicial Department of the Armed Forces , in 2020 there were 118, in 2021 – already 151, and for the first half of 2022 – already 149.

Some deputies feared that the proposed wording left too much to the discretion of the judge. Mr. Loginov noted that it is too early to talk about how this norm will be implemented in practice. And Ms. Pankina recalled that similar exemptions for entrepreneurs in the Criminal Procedure Code, in fact, already exist now, but “unfortunately, this design failed, and therefore a clearer mechanism is proposed” …

By the way, the very order of the president, following the results of the St. Petersburg International Forum, actually ordered the government, together with the Supreme Court, to ensure, by October 1, 2022, that not only changes were made to Russian legislation related to clarifying the grounds for detaining entrepreneurs. It also spoke about the need to fully or partially decriminalize certain business articles that are not related to deprivation of liberty, and to “consider issues” about increasing the thresholds for significant, large and especially large amounts of damage caused by economic crimes, including tax ones.

At first things went briskly. Already in August 2022, the Ministry of Justice prepared and published for public discussion a draft law designed to ensure the implementation of these two instructions. It proposed to decriminalize three articles of the Criminal Code: 171 (illegal business), 170.2 (introducing deliberately false information into a technical or land survey plan) and 185 (malicious evasion from disclosing or providing information defined by securities legislation). In addition, it was proposed to index the amounts of significant, large and especially large amounts of damage caused in some economic articles of the Criminal Code by 35% (such inflation has accumulated since 2016, when these amounts were last revised): in particular, with this approach, it was necessary to raise from 13.5 million rubles to 20 million rubles for three financial years, and for legal entities – from 45 million rubles to 65 million rubles for three financial years.

And what happened to this bill?

Looking at the Criminal Code, everyone can be convinced that both the articles listed above and the amount of damage still remain unchanged.