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. Last Updated: 07/27/2016

Bankruptcy Cases Launched Against Tax Debtors

Pressing its campaign to stave off a drastic revenue shortfall, the Russian government said Tuesday it has launched its threatened bankruptcy proceedings against four major companies for failing to pay their back taxes.

Pyotr Mostovoi, head of the federal bankruptcy agency, also said another seven enterprises that owe a total of 479 billion rubles ($88 million) in back taxes had been given one week to settle up or face similar action.

"I believe this should serve as a lesson for most taxpayers," he said.

The four companies facing bankruptcy are troubled Moscow carmaker Moskvich, truck manufacturer KamAZ, Rosneft's Krasnodarnefteorgsintez refinery and the Achinsky Alumina plant. The government claims they owe a total of 537 billion rubles ($98 million) in tax arrears.

Documents for two of the enterprises were already on their way to court, with the other two cases to follow shortly, said Mostovoi. He did not indicate which companies will go to trial first.

Mostovoi said that under Russian bankruptcy law, the companies could either be liquidated and their assets sold off, or they could be reorganized and put under outside management by court order.

Mostovoi said that although KamAZ provided documents confirming it had received an investment tax break from May to September, the Tatarstan-based truckmaker had a substantial previous tax debt.

The president of the autonomous republic of Tatarstan, Mintimer Shaimiyev, has threatened to ignore any federal order against KamAZ if his administration doesn't agree to it. Mostovoi said such assertions were unlikely to affect the bankruptcy proceedings.

"We cannot allow this to depend on someone's personal opinion, even if the person is a very high official," Mostovoi said. He also refuted the claims that the government was targeting only frail enterprises with no support from powerful lobbies in the government and Kremlin. "We want to treat all the taxpayers in the same manner," he said.

He said the government aimed to punish only enterprises that pay less than 20 percent of their monthly tax bills.

Though huge, influential enterprises like the gas monopoly Gazprom are by far the biggest overall tax debtors, Mostovoi said they regularly pay at least 70 percent of their monthly taxes.

Two of six companies on the government's original target list -- oil producers Tatneft and Purneftegaz -- supplied documentation that they had covered the debts by supplying oil and fuel to agriculture industry under a commodity loan scheme.

"These mutual settlements fully cover the current debt of those enterprises," Mostovoi said.

But he said the case also illustrated the lack of tax discipline because the companies agreed to supply the relevant documents only when threatened with court proceedings.

Mostovoi said the agency also plans to check the books of another 12 companies that have been paying less than 20 percent of their monthly taxes.

They include three major oil companies: Sibneft's production unit, Noyabrskneftegaz; Sidanco subsidiary Varyoganneftegaz; and the Tyumen Oil Co.'s oil producer Nizhnevartovskneftegaz.

Mostovoi said only one-third of the oil sector pays taxes regularly, while the rest of the industry meets 50 percent to 80 percent of tax obligations or does not pay at all.

But before applying tough measures to such companies, he said, the government will try to determine whether they were unable to cover their taxes because they were not being paid by their debtors, including the federal government.

Many companies blame the chronic non-payments, which plague the entire economy, as the answer to their inability to settle their tax debts.

Mostovoi also named Moscow-based truck producer ZiL among companies that will come under "close scrutiny."

He refused to say whether the company, which owes more than 500 billion rubles mn back taxes, would be included in the group of enterprises facing bankruptcy procedures.

The city of Moscow recently bought a controlling stake in the once-proud company, and Mayor Yury Luzhkov has pledged to rescue it from what he has termed "ill-conceived" privatization.