Yukos Fails To Overturn $3.5 Billion Back Tax Bill

by Tatiana Smolenskaya, Tax-News.com, Moscow

07 October 2005

The embattled Russian oil major Yukos suffered another in a long line of legal setbacks this week when the Russian Court of Arbitration ruled that a $3.5 billion bill for back taxes was legitimate.

In upholding the claim for back taxes which relate to the 2000 tax year, Russia's highest commercial court dismissed arguments by Yukos that the statute of limitations had expired. In the court's opinion, the statue of limitations cannot apply in the Yukos case because it does not extend to companies which have a history of tax delinquency.

A company spokeswoman told the New York Times that the ruling was another example of the Russian authorities applying the law "uniquely for Yukos". She went on to tell the newspaper that the ruling opens the possibility that the company's remaining assets could be seized by the government. These include lucrative oil fields in Siberia and southern Russia which are said to be worth around $7 billion.

Yukos has been pursued relentlessly by the Russian authorities since allegations of tax evasion were made against it in 2003 in what many observers believe to have been a highly politicised campaign on the part of the Putin administration. The firm's former chief executive, Mikhail Khodorkovsky, a political opponent to President Putin, now languishes in jail after being found guilty of various tax evasion and fraud charges.

The firm's ultimate bill for outstanding tax eventually topped $28 billion and late last year, the company's main production unit, Yuganskneftegaz, was auctioned off. With the its bank accounts frozen, the company's total liabilities now outweigh its assets.

Recommended