Tax Service Will Have Free Access to the Accounts and Safes of Bank Customers

Опубликовано: 29.09.2020

Starting next year, the tax service, upon written request, will be able to receive detailed information on transactions on bank accounts and the maintenance of safes of enterprises and citizens. “Minfin” was figuring out what rights the state was going to give the fiscal officers, what it was needed for and what it might result in.

Banking Secret Will Be Edited

The first hit about expanding the powers of the tax authorities in early autumn was made by the Head of the Council of the National Bank Bohdan Danylyshyn. On his Facebook page, he wrote about the need to reconsider approaches to defining bank secrecy and to simplify the tax authorities’ access to information on the accounts of economic entities. Thus, the state will be able to fight the shadow economy more effectively.

Currently, upon written request, the tax service can receive from the bank only information about the existence of an account. If fiscal officers want to know more, they have to go to court. That, quite often, is still the hassle.

“The courts want to see a real basis for providing information protected by bank secrecy. And when the tax authorities try to obtain such information, substantiating their claims not really diligently, the courts refuse them,” explains the Managing Partner of the “Suprema Lex” Law Firm, Lawyer Viktor Moroz.

The press service of the State Tax Service complained to “Minfin” that such restrictions greatly interfere with the quality of inspections as they narrow the ability to collect evidence of tax violations. As a result, they receive a significant number of administrative and judicial appeals against the results of inspections.

Expanding the authority to access banking secrets will lead to “an improvement in the quality of foreign exchange controls; identification of undeclared incomes of individuals and incomes subject to declaration or taxation,” summed up the press service of the State Tax Service.

Legal scholars say that information on the movement of funds through the accounts of citizens is of no less interest to tax authorities than data on banking operations of enterprises.

“Such information may be of interest to tax authorities in order to reveal the facts of tax evasion by individuals. We are talking about cases when they receive payment for their services to their personal accounts, do not declare such income in the future and, accordingly, do not pay taxes on them,” explains Nina Betz, Lawyer at the “Ilyashev & Partners” Law Firm.

Danylyshyn’s post turned out to be just the tip of the iceberg, behind which active legislative work was carried out. And the results of this work will be considered in the session hall in the near future.

Debtors Will Not Be Tolerated

The government has contributed to the attack on bank secrecy. The new powers of the tax authorities are provided for in the package of tax amendments, which are traditionally submitted together with the draft budget for the next year (Bill No. 4101).

The provisions of this document allow the tax office, upon written request, to receive information about the availability of money in accounts and in bank safes. Nevertheless, we are talking only about data on debtors, in respect of which the fiscal authorities have a court decision on an indisputable write-off.

As such, access at the request of the tax authorities will be provided to the bank secrets of all bank clients who have a tax debt, and a court decision has been made on it. This applies to legal entities, individual entrepreneurs and ordinary citizens.

The Ministry of Finance does not consider such a norm to be a violation of banking secrecy. “I do not think that anyone in a state governed by the rule of law can deny the obligation to execute a court decision that has entered into legal force. Therefore, the noise about the Ministry of Finance’s attempt to abolish the “sacred” banking secrecy is groundless,” wrote  the Deputy Finance Minister Svitlana Vorobei in her column for Interfax-Ukraine.

However, it is not as simple: legislative norms are written in such a way that they already open up the possibility for abuse.

“Neither the draft law, nor the specialized law “On Banks and Banking Activities”, nor the NBU regulations require the provision of a copy of the court decision, on the basis of which a request for access to bank secrets is drawn up. Therefore, a situation may arise when bank secrets are disclosed at the request of the tax authority, which is based on a court decision that does not apply to this taxpayer who is a client of the bank,” fears Ihor Reutov, Head of the Department and lawyer at “Gramatskiy & Partners”.

The next step after receiving the information may be the immediate debiting of funds from the account (or withdrawal from the safe) of the debtor, regardless of the amount and term of payment.

“Now the tax authority has such a right if the tax debt exceeds UAH 5 million and if it is not paid within 90 days. The bill removes such restrictions and extends the tax authorities’ right to any tax debt. This will put in a particularly disadvantageous position those taxpayers who have debts in terms of tax refunds from the state,” says Ihor Reutov.

Tax Service Watches Everybody

Even more radical changes in the procedure for fiscal access to bank secrets are proposed by the deputies. On September 8, a representative of the “Sluha Narodu” Faction and Chairman of the Subcommittee on Legal Support for the Activities of Tax Authorities Daria Volodina registered in the Verkhovna Rada amendments to the Law “On Banks and Banking Activities” (Bill No. 4073).

The document consists of only one innovation. The tax authorities receive the right, upon written request, to receive information on the state of bank accounts of citizens, individual entrepreneurs and companies for any period of time, indicating counterparties and purposes of payments.

Moreover, this also applies to those bank clients who are exemplary taxpayers.

Recent events show that both the legislative and executive branches of government and the NBU agree that the principles of banking secrecy need to be revised, or rather, it is necessary to expand the possibilities of the tax service. And now the only question is how far the authorities are ready to move in this direction.

Why We Mustn’t Pander to Tax Service

The authorities’ arguments look very convincing: the state must work to ensure that taxes are paid in full. In addition, the attack on banking secrecy is a global trend. However, legal scholars are decisively against this.

“It is premature to provide our tax authorities with an easy access to information on the movement of funds. After all, there is a risk that such information will be used for other purposes,” says Nina Betz from the” Ilyashev & Partners” Law Firm.

The problem is that, unlike the clients of banks in developed countries, our enterprises and citizens do not have effective judicial protection at their disposal. Throw the high level of corruption into the mix, and we get a very dangerous prospect.

“In most cases, information on the accounts of individuals and business entities is used for its intended purpose (to combat tax evasion). Nevertheless, there are cases of abuse by the tax authorities, when the relevant information is sold to competitors or allows the initiation of groundless criminal proceedings. Fortunately, such cases are rare,” says Victor Moroz from “Suprema Lex”.

Now, no one can guarantee that such cases will not become more frequent after simplifying access to bank secrecy. In addition, experts warn that problems for bank customers may arise for other reasons.

Managing Partner of K.A.C. Group Volodymyr Harkusha sees risks in the fact that for each transaction with the account (crediting or expenses), which is not comparable with the declared income, tax officials may have questions to the owner of the bank account. Questions may be followed by inspections, and, based on the results of the inspection, fines and other sanctions may be applied. If the scope of the issue is large, there may be a risk of prosecution.

“Still, firstly, an employee of the State Fiscal Service often does not have the proper qualifications to determine the commercial sense of a particular operation. If they had, they would not be a tax clerk, but an entrepreneur. Secondly, there is a high risk of using the information received by the same SFS employee for personal purposes almost without any responsibility,” Volodymyr Harkusha sums up.

There are big doubts that the deputies will want to take these counterparts into account when they consider the relevant legislative initiatives in the session hall, unless the instinct of self-preservation will kick in for them.


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