BP’s Russian Venture Hit With Back Tax Claim

by Tatiana Smolenskaya, Tax-News.com, Moscow

13 April 2005

Despite President Vladimir Putin’s attempts to reassure foreign investors of Moscow’s pro-business intentions in the wake of several highly-publicised tax investigations, business confidence in the country has received yet another body blow with the news that BP’s Russian unit has been given a back tax bill for a sum approaching $US1 billion.

Speaking on the sidelines of the annual Russian Economic Forum in London, Viktor Vekselberg, executive director and a major shareholder in the joint Russian-British venture TNK-BP confirmed that the firm was in receipt of the sizeable tax claim, observing: "This is a big sum, which may significantly impact the company's results. I don't want to believe that this can be another Yukos story."

Vekselberg reportedly went on to add that the company intends to fight the tax claim, which relates to the 2001 tax year, in the courts.

According to the Moscow Times, the tax claim has not come entirely out of the blue, and company spokesman Peter Henshaw told the paper that the claim is the result of a review of the firm’s finances which has been underway since December.

However, the timing of the news could hardly be worse given the Kremlin’s attempts to draw a line under the now infamous Yukos/Khordorkovsky tax affair and restore its reputation with the business community. It is also likely to cause a degree of embarrassment for the President, Vladimir Putin who was keen to espouse the government’s pro-business credentials at a recent economic summit with German Chancellor Gerhard Schroeder.

Russia’s benchmark RTS index fell by 2.5% on the back of the revelation, whilst TNK-BP’s shares tumbled by almost 7%.

The Federal Tax Service has disputed the figures which have been reported in the media, stating that the tax review is still ongoing and that therefore the final amount is not yet known.

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