American trace found in court

Tax officials accused Ambassador William Burns of interfering in the PricewaterhouseCoopers case

The Russian subsidiary of PricewaterhouseCoopers seems to be starting to get rid of the problems caused by the claims of the Federal Tax Service. Yesterday, the Presidium of the Supreme Arbitration Court partially reversed the decisions of previous instances to recover 290 million rubles from the company. tax claims for payment of VAT and sent the case for a new consideration. Claims for only 30 million rubles remained valid. (according to PwC lawyers, by 8 million rubles). According to experts, this money, coupled with the recently withdrawn PwC audit reports issued to YUKOS in 1995-2004, can be considered payment for the right to work in the Russian market. After all, they are sure, it is unlikely that the remaining cases against the auditor will end in favor of the tax authorities, otherwise the PwC conclusions issued to its other clients - Gazprom, the Central Bank, RAO UES of Russia and other large companies - will be called into question. Nevertheless, after the loss of the Federal Tax Service, Interfax released a statement from the service addressed to the Supreme Arbitration Court, attached to the case, stating that the US Ambassador to Russia William Burns interfered in the activities of the court, who indicated to the court that previous authorities, in his opinion, had not fully investigated the case.

As you know, at the beginning of this year, tax officials accused PwC primarily of aiding YUKOS. In their opinion, the auditor, knowing about the real state of affairs in the company, in particular about its use of tax evasion schemes, issued positive conclusions to YUKOS for several years. At the end of last year, the Federal Tax Service filed a lawsuit against PwC, accusing it of violating legal morality and ethics. After three months of proceedings and two searches conducted by the Ministry of Internal Affairs and the Prosecutor General's Office in the Moscow office of PwC, the judge of the Moscow Arbitration Court, Pavel Markov, who declared YUKOS bankrupt, found the auditor guilty and demanded to pay $480 thousand to the state treasury. Now PwC is challenging this decision in the appellate instance , the first hearing on the merits of the case is scheduled for July 17. And at the end of June, having learned that the Ministry of Finance had a complaint from the Federal Tax Service against PwC, which could trigger inspections by Alexei Kudrin’s department, the auditor hastened to withdraw all his opinions issued to YUKOS.

However, the YUKOS case for PwC appeared only after the auditor persistently appealed another tax case - claims relating to the payment of VAT and income tax. The Federal Tax Service accused the Russian subsidiary of PwC of illegally reducing the income tax base by the amount paid to PricewaterhouseCoopers Resources BV. According to the auditor's documents, it was involved in drawing up conclusions for PwC's Russian clients, but according to the tax authorities, in reality the services were provided by employees the Russian division of the company itself. Therefore, the tax authorities considered PwC to have underpaid, and the courts agreed with them. PwC paid the additional accruals in full, but at the same time filed a supervisory complaint with the Supreme Arbitration Court.

Yesterday, as Interfax reports, during the trial, a PwC representative noted that the auditor provided services not only according to Russian, but also according to international standards, so international specialists from the group’s foreign structure were involved. As a representative of the Federal Tax Service stated, the courts, having analyzed the circumstances of the case, concluded that even taking into account the explanations provided by the auditor, it is not clear what services were provided by foreign specialists. Therefore, according to the Federal Tax Service, the auditor carried out such a scheme in order to withdraw money abroad and circumvent Russian labor legislation. To this, a PwC representative pointed out that the company (the Russian subsidiary of PwC and PricewaterhouseCoopers Resources BV) did not receive any benefits or tax benefits from concluding the agreement, so there was no talk of any withdrawal of funds abroad. Nevertheless, lower courts indicated in their decisions that audit services do not relate to accounting, legal and consulting services, therefore the Russian Federation is recognized as the place of provision of audit services. This, in turn, means that the company had to transfer VAT on the cost of these services to the Russian budget.

But VAS did not agree with his colleagues on everything. “When considering this case, the court should have established whether the company’s expenses for paying for the company’s services are economically justified and documented, taking into account the provisions of Chapter 25 of the Arbitration Procedure Code and the law (on accounting - Ed. ), and indicate in the judicial act the evidence on on which the court’s conclusions about the circumstances of the case are based,” RIA Novosti quotes the materials of the Supreme Court, prepared for yesterday’s meeting of the presidium. “The judicial acts disputed in the case do not comply with the named provisions of the Arbitration Procedural Code of the Russian Federation.” As a result, claims amounted to 260 million rubles. were canceled, and the case was sent back to the Moscow Arbitration Court.

After this, Interfax reported that the Federal Tax Service had attached to the case a statement about the American trace in the proceedings. The Tax Service sent materials to the Supreme Arbitration Court stating that on February 26, 2007, the US Ambassador to the Russian Federation, William Burns, addressed the Chairman of the Supreme Arbitration Court. In the address, the ambassador indicated: “We are closely monitoring the important tax dispute” in which PwC is involved in Russia. As noted in the materials of the Federal Tax Service, the US representative further draws attention to the importance of PwC’s work in Russia, pointing out that among the audit firm’s clients are enterprises representing about half of the Russian economy. The Ambassador asked the Chairman of the Supreme Arbitration Court that the tax claims case be carefully considered as PwC "believes that the merits of the case and legal arguments were not adequately explored during the process." As the Federal Tax Service points out, after the ambassador’s appeal, the panel of judges issued a ruling to transfer the case for review by way of supervision, which contains the same argumentation as expressed by the ambassador - the panel of judges considered that the case was subject to review due to the courts’ incomplete examination of its materials. “The conclusions of both the judicial panel and the US Ambassador are refuted not only by all the materials in the case, but also by a simple reading of the judicial acts issued in the case,” notes the Federal Tax Service. All these circumstances “indicate an attempt to interfere in the activities of the Supreme Arbitration Court of the Russian Federation.”

There was no comment from the US Embassy last night.

Nikolay GORELOV