Russian Government To Maintain Pressure On Oil Firms Over Tax

by Tatiana Smolenska, Tax-News.com, Moscow

29 January 2004

The Russian government is to maintain its pursuit of the country’s oil giants in its quest to seek out past tax evasion, deputy Prime Minister Alexei Kudrin revealed this week.

In an interview with the Times at the World Economic Forum in Davos, Kudrin indicated that the government is currently investigating the prior activities of several oil companies. However, he was reluctant to reveal whether another Yukos-style scandal was about to be uncovered.

Kudrin told the UK newspaper that “the only thing I can tell you for sure is that if they used these loopholes within the legal framework and they were permitted by legislation at the time there will be no punishment of these companies.”

Several oil firms are known to have employed tax minimisation strategies, they claim perfectly legitimately, which shifted funds to Russia’s outlying regions in order to take advantage of significant tax breaks. However, the government has already begun to legislate to close down these loopholes.

Whilst the Deputy Prime Minster acknowledged that the ongoing Yukos saga and the imprisonment of the firm's former chief executive, Mikhail Khodorkovsky may have sullied Russia’s image with investors, he played down the longer term impact it may have on the country’s reputation.

According to Kudrin, inflows of foreign capital to Russia in the last quarter of 2003 ran at record levels, and he pointed to healthy growth in the value of Moscow’s RTS Stock Exchange index. He also stressed that the government will not stand in the way of bids by foreign oil firms to take control of Russian energy concerns.

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