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Russian Audit Chamber accuses TNK-BP of tax evasion

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MOSCOW, August 4 (RIA Novosti)-The Audit Chamber of Russia has accused the Russian-British oil company TNK-BP of failing to honor the terms of license agreements on a number of deposits and of using transfer schemes to avoid paying taxes, a leading business daily reported Thursday.

Kommersant wrote that the company rejected the accusations.

According to auditor Vladimir Panskov, the Chamber had sent a letter to the Federal Tax Service stating that in 2004 and early 2005 TNK-BP had used a tax-evading scheme by lowering prices.

In particular, TNK-BP set up two companies in the Tyumen region in Western Siberia, with an authorized capital of 3 million rubles each (about $105,000), to which producers supply oil at reduced prices. Then these enterprises sell the same oil to refineries at normal prices. As a result, the two companies reported profits of 84 billion rubles (about $3 million) in 2004. Besides, they enjoy a 4% profit-tax break from the Tyumen region. As a result, their net profits rose by another 4.2 billion rubles (about $146 million).

"For some reason the federal tax service has turned a blind eye to this," Panskov said.

TNK-BP said that the transfer pricing used by the company was legitimate and did not amount to tax evasion. The company, moreover, said it had received no claims from tax authorities so far.

The Chamber also sent a complaint to the Natural Resources Ministry. The complaint said that TNK-BP, in particular, failed to observe a license obligation to put the Malosiktorsky oil deposit (Khanty-Mansi autonomous area in Western Siberia) into operation.

Besides, TNK-BP has a working well index significantly lower than that of rivals Surgutneftegaz and Tatneft. "An average of 30% of the company's wells are idle, and in individual producing companies that belong to the TNK-BP group the figure is even 50%. We have never seen anything like it. I think these figures must set us on the alert," the auditor said.

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