Procedures for judicial review of audit results are quite common for companies. In addition, the practice of successfully appealing of the decisions of the controlling body made following the audit results by the payers is quite widespread. An important proof in this case can be economic expertise findings. What are the legal bases for applying economic expertise?
World practice
The use of expertise in tax disputes by specialists with specific knowledge is a worldwide practice, and experts with relevant qualifications work in many countries. Also, the current legislation Ukraine (the Law of Ukraine “On legal expertise” No. 4038-XII of February 25, 1994) provides that in cases when specific knowledge is required to eliminate contradictions between different points of view, an expertise is to be conducted with the involvement of the carrier of such knowledge – expert in a particular field.
Expert opinion
The expert’s findings may be used by the parties to the tax audit (both the controlling body and the taxpayer) at the stages of its conduct, the submission of objections to the act of verification (together with the documents substantiating the nature and grounds for the objection) and at the stage of appealing the results of the tax audit. The supervisory authority may also order a legal expertise in case criminal proceedings are opened following the results of tax audit (for example, under Article 212 of the Criminal Code of Ukraine (hereinafter – Criminal Code) – tax evasion (obligatory payments).
Let us remind that the expert's opinion is in writing and attached to the case. The court accepts the results of the examination as evidence.
Expert opinion contains:
- when, where, by whom, on what basis the examination was conducted;
- questions posed to the expert;
- materials used by the expert;
- detailed description of the research carried out, its findings and substantiated answers to the court's questions.
Commissioning procedure and subject matter
The procedure for commissioning and conducting legal expertise is governed by the Instruction on the commissioning and conduct of legal expertise and expert studies, approved by order of the Ministry of Justice of Ukraine No. 53/5 of October 8, 1998 (hereinafter – Instruction No. 53/5). According to Art. 9 of the Law of Ukraine “On legal expertise”, legal experts are included in the State register of certified legal experts, maintained by the Ministry of Justice of Ukraine.
The subject of economic expertise (expert study) is the expert's opinion on the questions posed. It is important to understand that business transactions are subject to accounting and affect the formation of a tax base, but the expert does not investigate business transactions on their nature, legality and reality. Economic expertise focuses on researching and establishing documentary grounds for reflecting business transactions in accounting records and reporting. Therefore, solving issues related to the unreality of the business operation, economic impracticality, the establishment of perpetrators of the tax offense is not the subject of economic expertise and is within the competence of a legal expert – economist.
Restrictions on the range of issues
Instruction No. 53/5 introduces restrictions on the list of issues that can be solved by a legal expert, in particular:
- the expert is forbidden to resolve issues beyond his/her special knowledge and clarification of issues of law, and to provide an assessment of the legality of carrying out the procedures regulated by legal acts;
- performing audit actions (determination by economic experts of any economic indicators without prior documentary checks of financial and economic activity by the subject of control) does not belong to the tasks of economic expertise.
Particular attention should be paid to the accuracy of the questions posed to the expert when assigning the examination. After all, a typical mistake and a reason for not achieving the required goals during the examination is the incorrect formulation of questions.
