Ban on Sham in Administrative Law: Problems of Validity

Introduction: in 2016, administrative liability was introduced for violating the ban on the registration of sham accounting objects in the accounting registers, including sham transactions (hereinafter, referred to as the “ban on sham”). For more than five years, these elements have not found any targeted analytical understanding in the professional scientific and legal books, nor reflected in the practice of administrative offenses. Meanwhile, the “ban on sham” creates problems, preventing bona fide organizations from implementing the principle of freedom of contract, forcing them to distort their will in the form of refusing to conclude unnamed contracts, simplifying business relations, incurring the costs of auditing sham, etc. These circumstances have predetermined the purpose of the study – to identify the reasons for the lack of reaction of legal science and practice to the “ban on sham”, to assess its validity. Methods: dialectics, conceptual analysis, and the comparative legal method. Results: the common reasons for inattention to the “ban on sham” are the mega-branch, and therefore, unclear for most legal scholars, nature of the basic concept of “sham accounting objects”; the complexity of proving violations of the “ban on sham”. Special reasons for such inattention are the contradiction between the absence of a ban on sham transactions and the punishability of actions to include transactions in the accounting registers; the identification of sham transactions and sham accounting objects in the legislative documentation; the possibility of qualifying violations of the “ban on sham” by related sets of facts. The legal groundlessness of the introduction of the “ban on sham” is shown. An approach to the correction of the legislation is proposed. The scope of application of the results is administrative, financial, civil, constitutional law, legal research, law enforcement, and lawmaking. Conclusions: the amendments to the legislation on accounting and the abolition of the “ban on sham” are required.