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    Audit Chamber queries TNK-BP on tax minimization

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    MOSCOW, August 4 (RIA Novosti commentator Peter Lavelle). The Audit Chamber announced Wednesday it had written to the Federal Tax Service concerning TNK-BP's use of tax minimization schemes in 2004 and early 2005 through transfer pricing.

    The Audit Chamber claims TNK-BP established two companies in the Tyumen region to receive oil from production companies at lowered prices and then sell it at normal prices to oil refineries. These two companies posted a 2004 net income of 84 billion rubles ($2.94 billion). According to regional legislation, this income was subject to a profit tax rate 4 percentage points below the 24% statutory rate. As a result, the group's profit was 4.2 billion rubles ($147 million) and higher than it might have been.

    TNK-BP is probably not particularly worried about this tax investigation as tax breaks to stimulate investment in oil producing regions are standard and used by all Russian oil companies. Additionally, there is no precedent of a company or individual being prosecuted after an Audit Chamber tax investigation.

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