Business Calls on Law Enforcement to Stop Pressuring Companies: Can New Approaches Help Solve the Aircraft Leasing Problem?

Representatives of Ukrainian businesses, during a meeting with the leadership of the Office of the Prosecutor General, the Economic Security Bureau and the National Police, stated that it was unacceptable to use criminal proceedings as a tool to pressure companies. Among the key problems, businesses cited unjustified searches, the seizure of property and accounts, protracted investigations and the criminalization of tax disputes. A telling example of the latter problem remains the situation surrounding Ukrainian airlines, which came under criminal pressure after the ESB changed its approach to interpreting the taxation of aircraft leasing, UNN writes.

Criminal proceedings must not become a tool to pressure businesses

Oleh Hetman, coordinator of the expert groups of the Economic Expert Platform and an associate expert at CASE Ukraine, said that a significant part of the meeting was devoted to the problems companies face during pretrial investigations.

These include, in particular, urgent searches, the blocking of accounts, the seizure of property and delays in the investigation of criminal proceedings. 

"The issue of the inadmissibility of using criminal proceedings as a tool of pressure was also discussed, as were the problems of seizing accounts and property, urgent searches and delays in pretrial investigations," – Hetman wrote following the meeting, which was attended by Acting Prosecutor General of Ukraine Anton Kovalskyi, representatives of the Prosecutor General's Office, Deputy Director of the Economic Security Bureau Yurii Bielousov, representatives of the National Police, Business Ombudsman Anka Feldhusen and leading business associations.

According to him, a representative of the Business Ombudsman's Council drew attention to situations in which companies remain involved in criminal proceedings for years without a defined procedural status. Even without searches and seizures, this creates reputational risks and may deprive companies of the opportunity to obtain bank financing.

The participants also discussed the need to clearly distinguish deliberate tax evasion from errors in tax accounting. The mere existence of discrepancies in the interpretation of tax legislation should not automatically become grounds for criminal prosecution.

Hrihol Katamadze, President of the Association of Taxpayers of Ukraine, who took part in the meeting, emphasized in a comment to UNN the need for law enforcement agencies to change their approach to interaction with bona fide taxpayers.

"We must clearly distinguish genuine economic crimes from commercial disputes arising because of ambiguous interpretations of the law. It is unacceptable for a company to remain under the pressure of criminal proceedings for years when the issue can be resolved through administrative or judicial procedures," – Katamadze said in a comment to UNN.

In his view, businesses should not have to prove their innocence merely because a law enforcement or regulatory agency interprets tax rules differently. 

"If we want to preserve investment, jobs and budget revenues, we must ensure predictable rules and stop the practice of using criminal proceedings as a tool of pressure," – Katamadze explained.

During the meeting between business representatives and law enforcement officials, the need to ensure adequate funding for the ESB, including the recruitment of qualified analysts, was also emphasized. This should help shift from force-based methods to professional analysis of economic offenses.

Aircraft leasing as an example of the criminalization of tax disputes

One example of how an ambiguous interpretation of tax legislation can escalate into criminal pressure on businesses is the situation in the civil aviation sector.

Since 2024, the State Tax Service and the Economic Security Bureau have begun treating Ukrainian air carriers' payments to nonresidents for the leasing of aircraft and helicopters as royalties. At the same time, tax legislation and international conventions on this matter had not changed for decades.

The airlines insist that these are lease payments for the use of vehicles, rather than remuneration for the use of intellectual property or the use of equipment, as the detectives of the Economic Security Bureau of Ukraine believe.

The problem is compounded by the fact that leasing is one of the main mechanisms for forming an aviation fleet both in Ukraine and worldwide. In particular, in Ukraine, 86% of aircraft are operated under leasing arrangements. Therefore, changing the approach to taxing such transactions creates risks for the majority of Ukrainian air carriers.

According to UNN, six Ukrainian airlines have already encountered problems and criminal cases.

Court practice in Ukraine distinguishes rental and lease payments from royalties. This strengthens the business community's argument for a unified and predictable approach by state authorities and its compliance with international law.

The situation is particularly acute given that, after the start of the full-scale invasion, Ukrainian airlines were forced to relocate a significant part of their operations abroad in order to preserve their professional teams and fleets. Despite this,  carriers pay taxes in Ukraine; in particular, in 2022–2025, enterprises in the aviation sector transferred almost UAH 27 billion in taxes and fees to the Ukrainian budget.

Under these circumstances, criminal prosecution over the disputed interpretation of lease payments to non-residents creates additional risks for preserving the entire civil aviation sector and returning Ukrainian carriers to the domestic market after the restoration of civil air travel.

Representatives of the aviation industry consider the adoption by the Ministry of Finance of a general tax consultation (GTC) to be one possible mechanism for resolving the problem. It would ensure a unified approach to applying current tax legislation to the leasing of aircraft from non-residents.

For the aviation business, it is crucial that the relevant explanations also be taken into account when considering criminal proceedings that have already been opened.

That is why the agreements reached by the business community with the leadership of the Office of the Prosecutor General and the Economic Security Bureau on revising approaches to economic investigations may also have practical significance for the aviation industry. If the state seeks to distinguish intentional tax crimes from bona fide business transactions and disputed issues of legal interpretation, the situation with aircraft leasing could become one example of applying such an approach.

From agreements to practical solutions

At the meeting with the business community, particular attention was also paid to Draft Law No. 12439 "On Amendments to the Criminal Procedure Code of Ukraine Concerning the Improvement of Guarantees for the Protection of Business Entities During Criminal Proceedings," aimed at strengthening procedural guarantees for protecting business entities during the investigation of criminal proceedings. To expedite its consideration, a joint meeting involving the leadership of the relevant committee of the Verkhovna Rada is planned.

In addition, the participants of the meeting agreed to work on the issue of publishing more detailed statistics on the work of law enforcement agencies. In particular, the business community proposes publishing information not only on the number of criminal proceedings opened, but also on searches conducted, arrests of property and bank accounts, the number of cases referred to court, and the results of their consideration.

Such an approach would make it possible to assess the effectiveness of law enforcement agencies based on the actual results of investigations, rather than on the number of cases opened.

During the meeting between business representatives and law enforcement officials, the issue of bringing the economy out of the shadows was also discussed. Representatives of individual sectors presented estimates of budget losses from shadow schemes.

In particular, according to the studies presented by the participants, annual budget losses from the shadow segment of the security services market may amount to UAH 24–25 billion, from the gambling industry — UAH 16–20 billion, from the tobacco industry — more than UAH 30 billion, and from the bakery industry — up to UAH 20 billion.

The relevant materials were handed over to representatives of the Office of the Prosecutor General, the Economic Security Bureau, and the National Police for further review.

Thus, business representatives proposed that law enforcement agencies separate two areas of work: strengthening efforts to combat genuine shadow schemes and protecting enterprises that operate legally but face criminal prosecution due to tax disputes.

According to Oleh Hetman, the participants in the meeting reached agreement on all the issues discussed and agreed to jointly work out further decisions.