World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version | Page 53

EXPERT OPINION
people may be involved (accountants,
tax personnel etc). In short, the CEO
bears the risk.
Restrictions on CEOs during the
investigation
During
the
investigation
the
investigator may implement various
restrictions on the CEO, e.g. a writ
prohibiting the person accused
from leaving a city or country. He
may start an international search
for the accused person in certain
situations. (Kazakhstan is a member
of the International Criminal Police
Organisation and has signed a
number of bilateral treaties on legal
assistance and legal support in
criminal cases.)
The taxpayer’s access to
information on criminal proceedings
Even though the company is liable
for the tax (allegedly) underpaid,
management
cannot
obtain
information about the status of
the investigation as the company
is not the subject of the criminal
proceedings. Information is available
only to the accused person and/or
his/her advocate. This is problematic,
especially if the accused person leaves
the company.
a difficult process and is associated
with significant risk for the CEO.
Release from criminal liability may
occur at the pre-court stage or after
a court decision.
Pre-court (but during the criminal
investigation)
The 2017 amendment to the CC
(mentioned earlier) involved a so-called
note, which provides the grounds for
release from criminal liability at any
stage of proceedings (investigation or
court hearings). Essentially the note
states that if the tax assessment
and associated penalties are paid,
criminal proceedings are stopped.
The key point, however, is that
release on the basis of this “note” is
on non-rehabilitation grounds only
i.e. the accused person must provide
the investigator with his/her written
acknowledgement of conviction.
The person involved, therefore, has
a formal record on committing tax
evasion (for 10 years in the General
Prosecutor’s office). So the person’s
(CEO’s) reputation is tarnished and
it may cause difficulty in various
situations in future obtaining a work
permit, employment etc.
Influence of a civil court decision After the decision of the court
As mentioned, civil and criminal
proceedings run in parallel. If the civil
court decides (regarding the tax case)
in favour of the tax authorities, this
decision is taken as evidence of intent
to evade tax. If the criminal court adjudicates
against the person, he/she is
recognized as a criminal subject
to punishment, which may include
imprisonment. Clearly if the court
decides in favour of the person, there
is no criminal record of any sort.
However, the person concerned is
certain to have had an unfortunate,
unnecessary and probably traumatic
experience.
Closure of criminal proceedings
Formally closing criminal proceedings
and release from criminal liability is
Conclusions
The situation regarding criminal
liability for tax evasion needs to be
addressed urgently and on a systemic
basis. Existing investors in Kazakhstan
(and their management) are under
severe threat, and this is a significant
deterrent to new investment. This is
not an idle threat: the probability of it
materialising is high
In the short-term,
* existing investors must be aware of
the risk and develop plans to cater for
the risk materialising;
* potential new investors in Kazakhstan
must factor this into their decision-
making;
* systemic changes are required to the
law urgently. These include changing
/ abolishing the $145,000 threshold,
requiring tax inspectors and if relevant
inspectors to consider properly the
issue of intent, and making available
information on criminal cases to all
relevant parties (not just the accused).
A final observation. The issue of
criminal liability for alleged tax
evasion highlights the absence of
trust between the tax authority and
taxpayers and, to a great extent,
the belief of the authorities that
all taxpayers want to evade tax. In
an increasingly transparent world
where companies are scrutinised
by multiple stakeholders, in most
cases this belief is not sustainable. A
different approach to addressing the
tax authority - taxpayer relationship
needs to be considered.
The Normative Decree of the Supreme
court dated 18th of June 2004 # 2 «On
some qualification issues of criminal
offenses in area of economic activity»
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supported by EUROBAK
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