• ACI Russia

08/07/1998 12:30:29 FOCUS-Russia uses carrot and stick to collect tax

By Aleksandras Budrys

MOSCOW, Aug 7 (Reuters) - The Russian government on Friday

came down heavily on major tax debtors in the energy sector,

while showing at the same time it was willing to offer a carrot

to those who were ready to pay.

The government announced on Friday it had cut export rights

to Russia's fifth largest oil company by output SIDANKO by

223,000 tonnes and to Onako, the eighth biggest, by 37,000

tonnes for failure to pay taxes in time.

But on Thursday Prime Minister Sergei Kiriyenko visited the

headquarters of gas monopoly Gazprom with the clear intention of

demonstrating the government's reconciliation with the company

after a major row over tax underpayment by Gazprom.

Gazprom has now paid the state 3.1 billion roubles in

current taxes after the government ordered the seizure of

Gazprom assets. The order was suspended after the government and

Gazprom agreed to settle mutual debts by August 1.

Kiriyenko told reporters the government was ready to help

the gas company and the national electricity grid RAO UES to

collect cash payments for supplies to consumers which were

financed by the federal budget.

Russian Tax Service Chief Boris Fyodorov told reporters on

Friday the government was in the process of resolving tax

problems with UES. "The work (with UES) is bearing fruit," he


Earlier Fyodorov had said export cuts might also be applied

to Russia's biggest oil company LUKoil, but LUKoil managed to

clear all tax dues before the August 1 deadline.

Fuel and Energy Minister Sergei Generalov said on Thursday

the government intended to give LUKoil guarantees to help it

receive an international syndicated loan of between $1.5 billion

and $4.0 billion.

In July a group of Russian oil companies including LUKoil

and the second biggest, YUKOS, appealed to the Russian

government and the President over taxation policies which it

said were crippling the key energy sector.

The State Tax Service said on Thursday it had ordered the

seizure of assets of SIDANKO, Onako and YUKOS-controlled Eastern

Oil, for non-payment of taxes.

But the companies said on Friday they were not aware that

any seizures had taken place so far.

An Eastern oil spokesman said the company's management was

set to hold talks with state representatives to find a way out

of the situation.

SIDANKO was also ready to negotiate, but at the same time

said the government was too quick to apply sanctions.

"The exports have been reduced inappropriately," said Larisa

Zelkova, head of the information department at UNEXIM Bank,

which controls SIDANKO.

She said SIDANKO and some other oil companies, at the

suggestion of the government, had signed a protocol in June with

the Tax Service under which they guaranteed part of their

subsidiaries' debts with credits backed by oil exports in the

third quarter.

"As this protocol doesn't seem to have worked, as far as I

know, SIDANKO has been trying to negotiate some constructive

solution with the government," Zelkova said.

Onako told Reuters it was ready to pay, despite losses

caused by the collapse in world oil prices.

"I believe in the middle of August the problem will be

solved," Onako's vice-president Irik Uzbekov said.

Kiriyenko on Wednesday met several Russian oil chiefs, who

pleaded with the government to lower the tax burden on oil

companies and change the excise duty on oil.

But Kiriyenko successfully insisted that the companies paid

their current taxes in full.

The two sides decided at the meeting to set up a body in the

next few days to create a flexible tax system for the oil sector

"which will take into account international circumstances and

other external factors".

But Russian economic daily Kommersant said this commission

would have little effect, suggesting it had only been proposed

to buy time for the government before new demands were made by

the oil barons.


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