Kyiv businesses will soon have to spend a long time knocking on the doors of their district tax offices to securely register their tax invoices through MEdoc.
On April 25, a roundtable meeting of government, business, and civil society representatives was held at the LIGABusinessInform Press Center. The roundtable discussed the challenges posed to taxpayers by the electronic VAT administration system.
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L. Demchenko, Head of the State Fiscal Service Directorate in Kyiv, also attended this meeting. She announced her initiative, ostensibly designed to eradicate the "shadow economy" in the capital's economy once and for all.
This initiative consists of signing an additional agreement with taxpayers to the Agreement on the Recognition of Electronic Documents, which provides for such an innovation as the procedure for “suspension” of the effect of such an agreement, and also significantly expands the conditions for unilateral termination of the agreement by the tax inspectorate.
Interestingly, the content of such an additional agreement is not regulated by any regulatory act of the fiscal service.
Ms. L. Demchenko, however, apparently is unaware that this agreement is not a typical business contract under which the inspectorate purchases office supplies and toilet paper for its own needs. This agreement is administrative, and its conclusion and content are regulated by the Laws of Ukraine "On Electronic Documents and Electronic Document Management," "On Electronic Digital Signatures," and Order No. 233 of the State Tax Administration dated April 10, 2008, registered with the Ministry of Justice.
This administrative agreement regulates the relationship between a business and the executive authority (tax inspectorate) in the process, including the registration of tax invoices by taxpayers in the Unified Register of Tax Invoices, which, according to the provisions of the Tax Code of Ukraine, is the direct responsibility of the taxpayer, failure to comply with which threatens a fine for the enterprise.
Without an agreement concluded with the tax inspectorate on the recognition of electronic documents, the taxpayer cannot fulfill his obligations as defined by the legislator.
Therefore, the provisions of the Commercial Code have no bearing on this type of relationship, as is expressly stated in the code itself (see paragraph 5 of Article 4 of the Commercial Code of Ukraine); there are no commodity-money relations here. The tax inspectorate has no right to incorporate its own wishes into this agreement, as it would into an agreement for, say, servicing its office equipment. The provisions of the Model Agreement on the Recognition of Electronic Documents, which is listed in the Appendix to Order #233, are not advisory but mandatory for tax authorities when concluding agreements with taxpayers.
Apparently, the very title of the document, “Model Agreement” (which for the average person means that it is presented simply “as an example”), played a cruel joke on L. Demchenko’s imagination.
But any qualified lawyer understands that, due to its registration with the Ministry of Justice, this order is a fully-fledged regulatory legal act. Amending it would be tantamount to the tax inspectorate amending the provisions of the Tax Code of Ukraine at its own discretion.
Nevertheless, L. Demchenko's initiative is currently being actively implemented, and Kyiv businesses are already receiving informational notifications from their tax authorities through MEdoc:
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Taxpayers are being asked to sign an additional agreement to the contract, which sets out new versions of Section 5 "Procedure for Resolving Disputes" and Clause 4 of Section 6 "Term of the Contract." Now, Kyiv tax authorities want:
— In the event of disputes arising regarding the authenticity (!) of electronic tax documents, the regulatory authority has the right to decide to temporarily suspend this agreement.
By authenticity of tax documents the inspectorate means:
— establishing compliance of the electronic document details with the requirements of current legislation, verification of the electronic digital signature,
— the electronic document was created or submitted by an authorized person who created it on the basis of reliable information specified in the document,
— time (period) corresponds to the time of creation or submission of the electronic document.
This is not a complete list of requirements for the authenticity of tax documents. The word "etc." listed at the end of the list will reveal its own Inspector Lestrade in each of the capital's tax office directorates.
The absence in Article 20 of the Tax Code of Ukraine of the right of officials of the regulatory authority to verify the authenticity of taxpayers' tax documents does not bother anyone at the State Fiscal Service of Kyiv.
We read further:
— The taxpayer has the right, within 5 working days of receiving the relevant letter, to appear before the regulatory authority and provide relevant explanations and documents confirming the authenticity of the documents submitted electronically.
— The decision to temporarily suspend the contract may be appealed through the pre-trial dispute resolution procedure specified in Article 56 of the Tax Code of Ukraine or in court.
Dashing? That's not all. Read on.
— The State Fiscal Service body has the right to terminate the agreement unilaterally in the following (additional - note) cases: change of taxpayer officials, violation by the taxpayer of its obligations stipulated by Article 16 of the Tax Code of Ukraine.
Here's the article of the Code, so you don't have to search too long: https://zakon2.rada.gov.ua/laws/show/2755-17/paran788#n788
After reading the contents of this article, you will understand that the grounds for terminating your company's business activities may be a violation invented in a tax audit report, your legal refusal to respond to the inspectorate's request for accounting documents, and even a sideways glance at the inspectors (clause 16.1.9. "The taxpayer shall not violate the legal obligations of the land tax authority under the terms of the contract of the competent authority").
Everything stated above, according to L. Demchenko, is an experiment. That is, simply put, amateur performance.
Civil society representatives present at the Roundtable mentioned the following advantages of this "experiment," which I, as a business representative, would like to comment on:
1. “The tax police are completely removed from the relationship between business and the tax inspectorate within the framework of this agreement.”
For two years now (since April 2014), the Model Agreement (Appendix to State Tax Administration Order No. 233 of April 2, 10.04.2008) has not included the grounds for inspectorate termination of the agreement as "taxpayer's absence from the registered office." If the agreement is terminated due to the alleged absence (according to tax police officers) of the company at its legal address, one can restore one's rights within a week through the prosecutor's office (from my own experience).
2. “Contracts are not terminated, but suspended.”
But for businesses, frankly speaking, it doesn’t matter what formal interpretation is used to prevent them from conducting their business activities normally.
3. "The payer knows the specific person they need to contact to resolve the issue. The payer's documents are reviewed by a panel."
I think, from a corruption risk standpoint, this doesn't seem convincing. The human factor, on the contrary, should be ruled out in such situations.
The fight against the shadow economy using administrative methods will never bring the desired result, unless the real goal is the head of the tax inspectorate to fight his own poverty.
Such "experiments" are like fighting crime in a city by turning off the lights at night in all areas.
Everyone should mind their own business. To combat the "shadow economy," there's the tax police. Its thousands of members and the new Criminal Procedure Code make it possible, in theory, to defeat the "shadow economy" nationwide within a month. True, complete victory is still a long way off. The eternal question of who's to blame and what to do next is fodder for philosophical reflection among police brass, accompanied by a glass of old whiskey and a good cigar.
But all this shouldn't mean that the head of the inspectorate can decide who should and shouldn't work "by eye." Or determine the "authenticity" of entrepreneurial activity by the thickness of the envelope—the dismal results of lustration in the State Fiscal Service agencies do not allow us to hope for the presence of people with a crystal-clear reputation and high public trust in leadership positions.
And even if the head of the inspection is exceptionally principled and incorruptible, he does not have the right to assume the powers of the court by deciding who is outside the law.
So why does the head of the Kyiv State Fiscal Service actually need all this? I think it's clear to everyone. Under the guise of good intentions—preventing (!) illegal shadow schemes—an attempt is being made to restore corrupt leverage to "real" businesses (the "shadow" ones will already have a deal with the tax authorities). After all, without a valid contract with the inspectorate, the operations of any enterprise are simply paralyzed; an unregistered tax invoice prevents the client from claiming VAT amounts included in the price of goods (services) as part of their tax credit.
And the most important question: are such initiatives of the head of the State Fiscal Service in Kyiv, L. Demchenko, legal?
Obviously not. The signing of such supplementary agreements is not provided for by Order No. 233 of April 10, 2008 (registered with the Ministry of Justice and considered a legal act). Any "suspension" of an electronic payment agreement or its unilateral termination by the tax authority on "expanded" grounds is a direct abuse of power by tax authority officials.
The State Fiscal Service has already experienced similar abuses when concluding agreements on the recognition of electronic documents: tax inspectorates in the city of Dnepropetrovsk introduced their own "innovations" into the Model Agreement.
In 2014-2015, the State Tax Inspectorate of Dnipropetrovsk forced taxpayers to sign agreements on the recognition of electronic documents with their own fictitious conditions for their unilateral termination.
It took the intervention of business ombudsman A. Shemeta to stop this creativity.
https://boi.org.ua/case-studies/8-perevischennya-povnovazhen-posadovimi-osobami-derz
Mr. R. Nasirov (read more: Roman Nasirov. The Business Past of Ukraine's Chief Tax Official ) certainly didn't find anyone responsible, but he promised that all contracts would be brought into compliance with Order No. 233. He even conducted an "audit" of all tax authorities across the country in October 2015.
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Incidentally, violators of Order 233 were also sought in Kyiv. But no violations were found.
And here we go again, the same old story. Will they find the culprits now? What do you think? Huh?
On the topic: Roman Nasirov. The business past of Ukraine's top tax official
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