Pre-trial Settlement of Tax Offenses: a Tool of Trust Rather Than Pressure

In recent months, the professional community has been actively discussing the pre-trial settlement mechanism for tax offenses proposed by the renewed leadership of the Bureau of Economic Security of Ukraine. In its structure, this mechanism largely mirrors the existing approach established in Part 4 of Article 212 of the Criminal Code of Ukraine, yet it introduces a critical difference — its application without formal notification of suspicion and without judicial oversight, which immediately shifts the discussion from expediency to the adequacy of safeguards.

The concept itself does not raise fundamental objections. Reducing the burden on the judiciary, limiting the number of criminal proceedings that ultimately end with the payment of assessed liabilities, and ensuring budget revenues are all rational objectives, particularly in a system where a significant portion of such cases never reaches trial and is instead used as a procedural leverage tool against businesses.

However, the practical implementation of this mechanism inevitably depends on the quality and substantiation of the claims formulated by BES detectives. Without addressing this underlying issue, any simplified procedure risks reinforcing existing problems while simultaneously weakening procedural safeguards.

It is well established that Article 212 of the Criminal Code of Ukraine is of a blanket nature, referring to the provisions of the Tax Code. This means that allegations of tax evasion must be grounded in violations of tax law as defined by the Tax Code, rather than constructed within internal analytical frameworks of law enforcement bodies. In practice, however, claims against taxpayers are frequently based on so-called “analytical products,” which are not recognized as procedural documents under tax law but effectively substitute formal tax audit reports.

While such analytical materials may be acceptable at the stage of initiating criminal proceedings, their subsequent use as a basis for tax assessments — and, more importantly, as an instrument of pressure through investigative actions — reflects a systemic issue that has shaped the business community’s distrust toward similar initiatives.

For this reason, criticism of the proposed mechanism from business and legal professionals is grounded in accumulated practical experience rather than theoretical concerns. Over time, the mere initiation of criminal proceedings has often functioned as a sufficient incentive for the “voluntary” payment of assessed liabilities, followed by the closure of the case.

In this context, the central issue is not procedural efficiency, but access to the materials underlying the claims. Without the taxpayer’s ability to review the analytical products or other documents forming the basis of alleged tax liabilities, the pre-trial settlement mechanism cannot function as a genuine tool for dialogue and instead becomes a unilateral imposition of the state’s position.

Particular concern arises from the proposed provision allowing authorities to refuse disclosure of evidence on the grounds that such disclosure could harm the pre-trial investigation. This directly contradicts the declared purpose of voluntary settlement and creates a situation in which taxpayers are expected to make decisions without understanding the factual basis of the claims against them.

Equally problematic is the issue of compensation for damages, as attempts to align criminal procedural provisions with the Tax Code’s framework for the repayment of tax debt effectively conflate distinct legal relationships, which may lead to further inconsistencies in practice.

Against this background, the proposed pre-trial settlement mechanism has the potential to become an effective instrument for both the state and businesses. However, its implementation is only feasible if clear and enforceable safeguards are established to ensure the objectivity of claims, transparency of evidence, and the taxpayer’s real ability to defend their position prior to any decision being made.

Otherwise, there is a substantial risk that, instead of simplifying procedures, the state will introduce a faster yet equally problematic mechanism that merely reproduces existing practices under a different procedural framework.