LUKoil Becomes Next Target Of Russia’s Tax Inspectors

by Tatiana Smoleskaya, Tax-News.com, Moscow

13 June 2005

A subsidiary of Russia's largest oil company, LUKoil, has become the latest target of the country's ever-eager tax inspectors who are claiming that the firm owes $1.5 million in taxes this year.

According to reports, the tax claim targets Lukoil's Naryanmarneftegaz unit, and company spokesman Dmitry Dolgov has revealed that it relates to value added tax payments that the company has already made to the government and is trying to claim back.

Dolgov has slammed the allegations by the tax authorities as "absolutely groundless" and a political attempt to discredit the company.

The latest tax probe follows closely in the wake of former Yukos chief executive Mikhail Khodorkosvky's conviction for tax evasion and fraud. Khodorkosvky, who had shown support for opposition political parties, was jailed for nine years after what has been widely regarded as a politically motivated trial.

This new tax claim is also the latest in a long line of highly publicised probes by the Russian Tax Service into company accounts, which have taken place across a number of industries. In the past eight months, the tax investigators have targeted British/Russian joint venture TNK-BP, Japan Tobacco, and the country's second largest mobile telephone operator, Vimpelcom.

While the Yukos affair and subsequent tax probes may have been the Kremlin's preferred method of sending a signal to the oligarchs, the subsequent spate of tax claims have merely served to damage business confidence in the Russian system - a fact observed in a recent OECD report which noted "a policy-driven deterioration in the business climate".

However, despite pledges by the President Putin's Cabinet to rein in the power of the tax inspectorate, it would appear that their work is not yet complete. Speaking recently on Russian television, Russia's deputy prosecutor general, Valadimir Kolesnikov warned that other oligarchs may face tax and fraud investigations similar to that undergone by Khodorkovsky.

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