Russian Tax Service Seeks Permission To Prosecute More Tax Evaders

by Tatiana Smolenskaya, Tax-News.com, Moscow

22 April 2005

The Russian Federal Tax Service has asked the Constitutional Court to lift the three year limitation on the prosecution of tax offences, opening the way for possible investigations into a company's tax affairs stretching back into the 1990s, the Moscow Times has reported.

According to the report, the tax service is arguing that the statute of limitations clause in the Tax Code contradicts two articles in the Russian Constitution which call for all taxes to be paid in full and guarantee equality before the law.

The tax service believes that by allowing those who have committed past tax offences to escape justice while others continue to pay their dues is tantamount to giving offenders special treatment under the law.

The appeal, taken up by the court on April 6, is likely to send many alarm bells ringing across Russia's business community, and is hardly likely to help the Kremlin's cause of spreading a more pro-business message in the wake of several high-profile company tax investigations.

Roy MacFarquhar, an economist at investment bank Goldman Sachs, was quoted by the Times as observing that a ruling in favour of the tax service "would leave virtually all major companies vulnerable to possible back tax charges."

Alex Bogomolov, senior tax manager at Grant Thornton, warned that a watering down of the statute of limitations for tax prosecutions could undermine all sorts of business and investment decisions.

"Any tax due diligence would just not work because it would not be clear how far back the tax service could dip," he noted.

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