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Incredible story about not quite terminated entrepreneur status

26.12.2019

Subject of complaint: Bucha City Council Administrative Services Center 
 
Complaint in brief: The Business Ombudsman Council received a complaint from a private entrepreneur arguing that government agencies were unable to completely register a termination of her entrepreneur’s activity. As a result, she had a debt to the tax authority. 
 
The entrepreneur decided to terminate her business activity. She approached the administrative services center to do it. The state registrar gave her description of the submitted documents and assured that termination of her business activity would be registered. However, the state registrar made a mistake. Instead of performing “decision to terminate” and “termination” registration actions she performed only the first one. The termination of business activity remained “incompletely” registered. And under the law, every private entrepreneur, even an inactive one, has to pay a unified social contribution (USC) from a minimum salary. 
 
As a result, when 9 months later the entrepreneur learned (by post from the tax authority) that her termination of her business activity had not been registered, the debt of the USC was already over UAH 6k. One can easily imagine what the entrepreneur felt at that moment.
 
When she turned to the tax authority, they simply threw up their hands and explained they relied on the state register data, from where she had not been excluded yet. Therefore, the USC was and continued being accrued. The entrepreneur came to the Administrative Services Center to complete the liquidation process. But the civil servant, who made the mistake had already changed her occupation by that time. Fortunately, her manager, realizing his responsibility, got down to correcting his colleague's failure. But instead of performing the registration action on the documents submission date, he performed it on an error detection date. 
 
As a result, the tax authority received a notice of liquidation and made sure of its having been right – the private entrepreneur was registered for the past eight months and the USC was accrued correctly. Accordingly, the USC claim was sent to the Enforcement Service and enforcement proceedings against the entrepreneur were initiated, the enforcement fee was charged. Her bank accounts were blocked.
 
The former entrepreneur fundamentally disagreed to put up with the absurd situation. She repeatedly turned to the Registration Department requesting to correct the mistake in the register (change the date of termination of her business activity to the correct one), but received replies with apologies for the inconvenience caused and explanations that correcting the date was technically impossible. She then tried to complain against the registrar’s actions to the Ministry of Justice, but received formal replies stating that her complaints did not meet formal requirements (improperly certified copies, no confirmation of ongoing trials absence). 
 
The ex-business lady turned to the Business Ombudsman Council at quite a late stage, when refusals had been received almost from everyone and there was little hope for a happy ending.
 
Actions taken: Predictions following preliminary case assessment did not look particularly encouraging. The Council had no doubt at all the Complainant was right. However, bureaucratic deadlock lasted for too long to expect to get out of it extrajudicially. At the same time, telling the Complainant the BOC couldn’t start investigating her case and her last hope was going to court would be the same as telling there was no hope at all in this case. 
 
So, the Council decided to try to help. Here's what the investigator in charge and the BOC’s team did: 
 
1) Advised the Complainant to lodge a complaint to the territorial justice authority against omission of the subject of state registration having made sure the complaint met all the formal requirements. The Registration Department not long before provided the Complainant with another written reply explaining impossibility of correcting errors in the register. Based on this response receipt date, one managed to prove that the deadline for filing a complaint was not violated (by the way, the expiration of deadlines is often the main obstacle in solving such old stories). 
 
2) During complaint consideration, the Council was once again told it was technically impossible to correct the register error, and even referred to the corresponding letter of the technical administrator of the register. Therefore, the Commission did not consider it possible to correct the date of termination of business activity. However, the Council’s investigator managed to convince commission members it cannot be left just like that, at least in the reasoning part of the commission's conclusion it was necessary to establish as a fact that state registrar’s actions were illegal and to impose a sanction to such state registrar. It was not a success yet, but a small step forward.      
 
3) “Equipped” with the commission’s conclusion in which the facts of state registrar’s illicit actions and incorrect business activity closing date were established, the investigator together with the Complainant went to the tax authority to convince tax officers to correct the information on outstanding USC. The dialogue was difficult at first. Fortunately, the head of the department was imbued with this issue and was eager to solve it. Following the communication, the tax authority, originally set to write another refusal to the entrepreneur, decided to apply to the territorial department of justice with an official request, asking to confirm the Complainant’s version of the real business activity closing date. 
 
4) Then the Council only had to contact the territorial department of justice and make sure one would provide a timely and meaningful reply to the tax authority’s request. 
 
5) Based on the received reply, the tax authority corrected the information on allegedly existing nine-month-old USC debt in the taxpayer’s integrated card. It was almost a victory.
 
6) At the Council’s request the tax authority informed the state executor on withdrawal of a previously sent debt collection request. Based on this request, the enforcement proceedings were closed and the Complainant’s accounts were unblocked, without the enforcement fees and enforcement proceedings costs not being charged.
 
Result achieved: Though almost nobody believed it at first but the case was successfully resolved.
 
It may not look quite impressive in the long run. In fact, actions taken and efforts made within the case were much more numerous than in many cases where millions of hryvnias are at stake. On top of that, in this case, success was always “hanging by a thread” and the Council’s team felt all the time it could slip away as a result of any false step.
 
A successful outcome of such cases is particularly motivating. Firstly, there is a sense the Council really helped the individual having no other possibilities or resources to protect his or her interests. If the BOC’s team hadn’t got involved in the situation it was highly likely the business lady would have just put up with it. Secondly, at such moments you realize yet there are exits from the most twisted, at first glance, bureaucratic mazes, that can be found through persistence and a certain bit of luck. In this case, the luck was to meet in state authorities several people who were supportive and willing to help.