Meat Plant Faces Landmark Tax Case

VedomostiA van selling meat from the Ostankino Meat Processing Plant, whose subsidiary is facing charges of tax fraud.
Tax authorities have opened a tax-fraud case against a subsidiary of the Ostankino Meat Processing Plant, which could potentially give them ammunition to fight off-the-book payment schemes and convict hundreds of companies still believed to be using this method of tax evasion.

In this potentially precedent-setting case, the tax authorities are accusing the Ostankino Meat Trading House of failing to pay both the personal income tax and unified social tax from 2004 to 2006, Kommersant reported Monday.

In a case currently before the Moscow Arbitration Court, the tax authorities are demanding that the company pay 9 million rubles in tax arrears, as well as penalties for tax evasion.

The Ostankino Meat Trading House is a 100 percent subsidiary of the Ostankino Meat Processing Plant, or OMPK. Last year, OMPK reported a before-tax profit of $350 million.

"If the tax authorities could prove their case, it would be easy for them to bring similar cases before the arbitration court by citing earlier decisions," said Igor Serebryakov, a partner at law firm Egorov, Puginsky, Afanasiev & Partners, said.

"The fact is that the same judges are likely to handle similar cases. This would be a boon to tax inspectors as it would make it easier to prove their case."

Serebryakov said a criminal case could eventually be opened against the company if the sum involved was large.

During a court proceeding last week, three former company employees testified to having received "gray salaries," a charge the defendants denied.

The authorities also presented taped evidence from three former workers to buttress their case.

Legal experts have stated that by seeking to secure a conviction in a case that is so hard to prove, the tax authorities are hoping that other companies using similar illegal practices can be prosecuted.

"This is sending a strong signal to other companies. This is the first time a medium-size company would be brought before an arbitration court for such tax offenses," said Serebryakov.

"In the past, courts of general jurisdiction have presided over smaller cases involving 'gray-envelope payment schemes,' therefore this is a new development," he added.

Victoria Tataritskaya, head of OMPK's legal department could not be reached for comment.