. Last Updated: 07/27/2016

Sibneft Hit With $1Bln Tax Claim

The Tax Ministry has told Sibneft that it owes $1 billion in back taxes, making Roman Abramovich's oil company the second after Yukos to feel the heat from a government drive to extract more taxes from the cash-flush sector.

"We have received an opinion from the Tax Ministry and we will respond to them with our thoughts," Sibneft spokesman John Mann said late Tuesday. "We're confident that our tax planning was in line with the law."

Earlier this year, the Tax Ministry kicked off a campaign to crack down on the widespread use of tax-minimization schemes by slapping Yukos with a claim worth some $3 billion.

The move ratcheted up the pressure on a company already reeling from a wide-ranging fraud and tax-evasion probe that landed Yukos founder Mikhail Khodorkovsky and his partner Platon Lebedev in jail. That battle has been seen as key to establishing greater state control over big business, in particular big oil.

Analysts said the Tax Ministry's claim against Sibneft is further indication that the government is determined to rein in the oil barons.

President Vladimir Putin on Monday nominated a former chief of the now defunct Tax Police, Mikhail Fradkov, as his choice for prime minister. Fradkov, according to some analysts, specialized in putting together dossiers on the tax schemes used by big business and was instrumental in building the government's case against Khodorkovsky and Lebedev.

Outgoing Prime Minister Mikhail Kasyanov was considered too close to tycoons like Abramovich and Khodorkovsky for the Kremlin's liking. Both Abramovich and Kasyanov are considered part of the Family clan of tycoons and bureaucrats that rose to power under Boris Yeltsin.

"With the departure of many political figures that were appointed during the Yeltsin administration, the political risks for such companies are high," said Steven Dashevsky, oil analyst at Aton.

Sibneft, however, insisted that the Tax Ministry's claim had nothing to do with Abramovich's political standing.

"This has nothing to do with our shareholders, this is a corporate issue," Mann said.

The Tax Ministry could not be reached for comment.

Mann declined to say when Sibneft had been notified by the ministry about the claim, which was for the year 2001, and he stressed that it was not "a tax bill," but rather an "opinion" that Sibneft could contest.

Political or not, analysts said the move increases the risks for oil majors like Sibneft who have aggressively made use of loopholes to minimize taxes.

"The bottom line is that the campaign to improve tax collection and eradicate tax minimization is not ending at Yukos," Dashevsky said. "Other companies should watch out."

When it comes to tax-minimization schemes, Sibneft is the best in the business. In 2001, the year in question, its effective tax rate was just 9 percent -- well below the statutory rate of 24 percent.

In a recent probe, the Audit Chamber charged that the company had lowered its tax payments to the federal budget by 10 billion rubles in 2001 and 2002, but it also conceded that the schemes were legal at the time.

Companies minimize taxes by using legal loopholes -- which are soon to be closed -- that allow some regional trading companies to be freed from profit taxes.

Yukos also made full use of these schemes, keeping its effective tax rate down to 13 percent in 2002.

Moves by the Tax Ministry to go after companies for exploiting legal loopholes are provoking fears the investment climate is becoming increasingly unstable.

"This is going to raise questions for foreigners on how the government appears to be changing the rules," said Paul Collison, energy analyst at Brunswick UBS. "This is a key sign that the government is taking more control over the oil sector. This is not positive."