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Cost of technical mistake in tax reporting

22.07.2020

Complainee: State Tax Service Service (STS), Main Department of the State Tax Service in Kyiv city (MD STS)

Complaint in brief:  The Council received four similar complaints from the group of agricultural enterprises.  The MD STS did not recognize their tax declarations as being duly completed and, therefore, excluded all four companies from the Registry of 4th Group Single Taxpayers. Choosing such a status is a widespread practice for both national and international agriculture producers: it significantly facilitates the accounting process and reporting submission. Hence, deprived of the status of a single taxpayer, the enterprises were obliged to switch to the general taxation system.
The MD STS did not recognize tax declarations of complainants only due to a technical mistake in the title of the addressee, that was “STI in Shevchenkivskyi District of the SFS MA in Kyiv city"” instead of the correct one “STS”. At the same time, the rest of the information in tax declarations was correct. It should be noted that the aforementioned mistake affects neither the relevant budget calculations nor administration of the single tax. The declaration of one of the companies was processed by the STS server after midnight the next day, so it was rejected due to delayed submission.
Nevertheless, the MD STS did not confirm the status of a single taxpayer in 2020 for all four companies. 
The Council immediately started consideration of complaints. Later, the Council also discovered that under similar circumstances the MD STS did not recognize declarations of approximately 50 other taxpayers.

Actions taken: Due to the quarantine, the investigators of the Council had to consider all four complaints in the format of teleconference, that did not prevent the complainants and the Council from presenting their position to the STS.

The Council recommended the STS to ensure a full, comprehensive and impartial consideration of complainants’ cases. In particular, having referred to the relevant case-law of the Supreme Court, the Council's investigators stressed the need for the tax authority to comply with the principle of good administration and proportionality. According to it, the STS has to take into account all the circumstances in order to make a consistent and objective decision in the case.

Results achieved: The STS largely upheld recommendations of the Council. The tax authority restored the status of a single taxpayer, though recognizing the declarations for only three complainants. Unfortunately, the STS did not satisfy the complaint of one of the companies since its declaration was received by the STS server after the deadline.