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Russian Finance Minister Accuses Oil Companies Of Holding Back On Taxes

Tatiana Smolenska, Tax-news.com, Moscow

27 November 2000


Russian Finance Minister Alexei Kudrin last week accused the country's oil companies of not paying their full share of taxes. He said that an investigation into how much tax Russian oil companies have paid on their output of crude has found evidence of widespread evasion.

The inquiry, a joint effort between the finance ministry, the tax ministry and the tax police had been begun in July, and the results were being sent to the president.

"Their answers exceeded our expectations," Alexei Kudrin said of the oil companies. "The amount of money that wasn't paid in taxes exceeded the amount the ministry of finance discovered."

It would have been more surprising if the enquiry had shown that the oil companies were paying their taxes correctly - the history of Russia's budget in the last ten years has been to a considerable extent a history of the power struggle between what used to be called 'the generals', ie the men (no women you can be sure) who control the commanding heights of Russian industry, and the Government. The generals turned into the oligarchs, but until recently the Government has been so deeply in debt to the oil and metals industries for political and financial support that it more or less had to accept what they chose to pay in the way of taxes. Quite often 'payments' were nothing of the sort, but just the writing off of spurious balances created in the labyrinthine depths of the industries' bizarre accounting systems.

So when we now hear that the oil companies have submitted to an investigation and that the results have bettered expectations, it is something of a miracle and shows how far the Russian government has come in trying to run a 'normal' country.

Of course, with crude prices at $30 a barrel, even the perennially cash-strapped Russian oil industry is presumably swimming in cash, so it can probably afford to dosh out a bit more than usual to the state budget.

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