Lawyers are sounding the alarm: “TAX Control” may violate the rights of entrepreneurs
21 November 08:53
The State Tax Service has announced the launch of a new tool, TAX Control, designed to automatically detect tax violations. However, lawyers warn that the service has been launched without defined risk criteria and without the necessary regulatory framework, which may pose threats to business. Lawyer Maria Dolynska writes about this in her article on the website of the Judicial and Legal Newspaper, "Komersant Ukrainian" reports
on November 20, the State Tax Service announced the launch of the digital service “TAX Control”, which should collect information on possible violations in the field of trade, services, restaurant business and other segments. According to the State Tax Service, the system will analyze large amounts of data and operate according to risk-oriented models, as is done by modern tax authorities around the world.
However, specialized lawyers point out that no official document regulating the operation of the service has been published yet.
No rules – no legal certainty
Mariia Dolynska notes that as of today, no legal act has been published that would define the legal regime of TAX Control, establish algorithms for processing information, set criteria for classifying transactions as risky, regulate the procedure for recording violations or procedures for further actions by the controlling authority.
“The issue of guarantees for the protection of taxpayers’ rights, in particular, access to information, the possibility of challenging the results of automated assessment and the appeal procedure, has not been regulated,” the article says.
Without these components, the service looks legally disordered and may contradict the principles of legality and proportionality enshrined in the Constitution.
“In such a situation, the introduction of a digital service without proper legal regulation creates risks of violating the principles of legality, legal certainty and proportionality of the tax authority’s actions, and also calls into question the admissibility of using the results of its work as a basis for management or control decisions,” the lawyer notes.
What risks do lawyers and businesses see?
The lawyer emphasizes that digital tools can significantly increase fiscal discipline, but only if they work in a transparent and understandable way.
“The service has the potential to increase fiscal discipline, but it can create disproportionate pressure on small and medium-sized businesses in case of non-transparent algorithms or false positives. The absence of a published regulatory impact assessment (RIA) is also a “red flag” because businesses have no way to assess the economic impact of the system,” Dolynska explained.
According to her, the State Tax Service emphasizes the effectiveness of the digital tool, while business representatives express concern about possible errors, hidden discretion and increased administrative burden. The expert community emphasizes the need to publicly define risk criteria, procedural safeguards and mechanisms for appealing decisions based on the service’s data.
How TAX Control works in practice
The user visits the STS web portal, clicks on the TAX Control widget, selects the type of violation (e.g., failure to issue a fiscal receipt, trading without a license or with violations of the sale of excisable goods, refusal to accept a card, operating without state registration, using unregistered employees) and fills out the form.
The form contains mandatory fields: the region and address of the place where the violation was detected, a brief description of the situation (at least 30 characters), the applicant’s contact information (name, postal address, phone number, email) and, if desired, a photo or other evidence (up to 5 MB).
All personal information of applicants, according to the State Tax Service, is protected and not transferred to third parties. The service is available throughout Ukraine, except for the temporarily occupied territories (Crimea, Donetsk, Luhansk, and Kherson regions).
After submitting the notification, the information is sent to the State Tax Service for further processing.
“Although the algorithms for processing signals have not been publicly disclosed, it can be expected that the notification, together with other analytical information, will be used for risk-based control, selection of entities for inspections or response measures. However, no details on the criteria for risk formation, data analysis algorithms or response procedures have been made public, which creates regulatory uncertainty,” the lawyer emphasizes.
Legal conflicts
The absence of legal regulations may conflict with
- art. 8 of the Constitution (rule of law),
- art. 19 of the Constitution (authorities shall act only within the limits and in the manner prescribed by law),
- the provisions of the Tax Code on the rights of taxpayers, including the presumption of lawfulness and the right to appeal.
“From a legal point of view, it is important to note that the functioning of such a digital tool must be combined with compliance with the principle of legal certainty enshrined in Article 8 and Article 19 of the Constitution of Ukraine, i.e., the authorities must act solely on the basis and within the limits of the powers provided by law. The use of automated signals as a basis for control or response measures without clearly defined procedures and criteria may contradict this principle. It is also important to take into account the provisions of the Tax Code of Ukraine on the rights of taxpayers, in particular the presumption of legality, the possibility of appealing decisions and the protection of economic activity,” Dolynska summarized.
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The State Tax Service is launching the digital service “TAX Control”. This is a tool for detecting violations in the field of trade, services or catering.
The digital tool is available on the State Tax Service’s web portal – just click on the “TAX Control” widget in the upper right corner and send a message. Everything is available 24/7 and from any device.
