British Entrepreneur Defends Russian Tax System

by Tatiana Smolenskaya, Tax-News.com, Moscow

20 April 2005

In a rare defence of the Russian tax system from a foreign investor's perspective, British mining entrepreneur Peter Hambro has argued that most companies only have themselves to blame when they are landed with multimillion claims for back taxes by the Russian tax service.

"People go into Russia and suddenly find what they did wasn't in accordance with Russian law. In the chaos years up to 1998 there were all sorts of tax issues that were unclear and maybe people were trying to exploit them to their benefit," Mr Hambro was quoted by UK's Daily Telegraph as observing.

Peter Hambro Mining Plc is a gold producer, whose shares are traded on London’s Alternative Investment Market (AIM) and focused on the gold mining industry in Russia.

"We enjoy collaboration with the government rather than try and be clever," Mr Hambro added.

As a result of this more cautious approach, his firm paid an effective tax rate in Russia of 34% last year, according to the Telegraph.

By comparison, Russia's actual corporate tax rate is 24%. However, Russian law does not enable Hambro to deduct the running of its London office from its taxable income, contributing much to this higher effective tax rate.

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