YUKOS case is tax lesson for Russia firms - watchdog

Russian Journal ^ | July 23, 2004

[RussianConservative]

MOSCOW - The legal onslaught on oil company YUKOS should serve as a lesson to other Russian firms to start paying taxes properly, the country's financial markets watchdog said on Thursday. YUKOS, Russia's largest oil producer, failed last month to pay $3.4 billion in back taxes for 2000 and warned investors on Thursday it could be driven into bankruptcy within a month.

"It's a good lesson. You have to be careful with taxes," said Oleg Vyugin, head of the Federal Financial Markets Service, Russia's version of the U.S. Securities and Exchange Commission. "It has to be understood that sooner or later you get what's coming to you. That's what life is all about," he told Ekho Moskvy radio.

YUKOS has been locked in a year-long standoff which most analysts say has pitted its politically ambitious former chief executive, Mikhail Khodorkovsky, against the Kremlin. "Anywhere in the world (tax evasion) is punished severely. And authorities never take into account the fact that by doing so they may be destroying a firm," Vyugin said.

Bailiffs enforcing tax payment are already preparing to sell off YUKOS' main operating unit in Siberia after it missed the deadline in July. Vyugin said the Soviet era had allowed absolute certainty in terms of investment, taxes and wages.

"But we now live in a market economy... You can always find a chance to evade taxes," he told Ekho Moskvy. "Of course it may not be that important to go 100 years back and catch some company which, say, in 1913, didn't pay some tax to tsarist Russia. But the important things is to impose new rules and in most cases this is done by teaching lessons."

[JOE6PAK]

YOKO?