Tax dispute or criminal risk? Expansion of the BES powers raises concerns for business

The Verkhovna Rada of Ukraine is discussing legislative initiatives aimed at strengthening the role of the Economic Security Bureau of Ukraine. Formally, tax administration powers remain with the State Tax Service of Ukraine; however, the proposed changes could significantly expand the Economic Security Bureau’s ability to obtain tax information and initiate criminal proceedings even before tax procedures are completed.

This is precisely what is being debated: could a routine tax dispute turn into a criminal matter even before it is finally resolved?

Where the risk lies

A tax dispute is a standard part of a business’s interaction with the state. A company has the right to disagree with an audit report, file an objection, pursue an administrative appeal, or go to court. Until a final decision is reached, the tax authority’s position is merely one side of the dispute.

However, if criminal proceedings are initiated in parallel, the situation changes fundamentally. Criminal proceedings may involve:

• searches;
• freezing of accounts;
• seizure of documents;
• suspension of business operations;
• significant reputational damage.

Even if the tax decision is subsequently overturned, the business may already have suffered financial and operational losses.

A Shift in the Logic of the Process

Traditionally, the mechanism worked as follows: first, a tax dispute—and only if a violation is confirmed is a criminal response possible.

If the amendments are adopted, criminal proceedings may begin in parallel with or even before the fact of the violation is definitively established. This creates a different risk profile for businesses.

Potential consequences for the investment climate

The business environment functions on the basis of predictability. If every tax dispute is accompanied by the risk of criminal proceedings, companies may:

• refrain from challenging questionable additional assessments;
• scale back investment projects;
• relocate their operations;
• transfer operations to other jurisdictions.

Separately, experts highlight potential corruption risks. When criminal enforcement tools can be applied prior to the final resolution of a dispute, they potentially become a powerful lever of influence. Whether this mechanism serves to protect the economy or creates additional pressure on businesses will depend on how it is applied in practice.

The issue is not merely a formal redistribution of powers among agencies. It concerns the balance between economic security and the protection of business entities’ rights.

If enforcement practice allows tax disputes to be turned into a tool for criminal influence before a violation is definitively established, this could have consequences for the investment climate and trust in the state as a whole.

Ultimately, it is the practice of implementing the new regulations that will determine whether the BEB becomes an effective tool for protecting the economy or a source of additional instability for businesses.