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. Last Updated: 07/27/2016

Report: Sibneft Pays Off Tax Claim

bloombergIndustry watchers welcomed reports that Sibneft's back tax claim was cut by two-thirds from the original $1 billion.
Sibneft reportedly has settled a $1 billion back tax claim by paying just $300 million, news that industry watchers welcomed Monday as promising for other oil companies and for all investors jumpy about the tax authorities.

No. 5 oil firm Sibneft, which is controlled by Chelsea soccer club owner and Chukotka Governor Roman Abramovich, has managed to negotiate a two-thirds cut to its tax debt for 2000 and 2001, and it paid the $300 million some time ago, Vedomosti reported Monday, citing a source close to the company.

Sibneft refused to comment.

Federal Tax Service spokeswoman Yelena Tolgskaya said by telephone that negotiations were a common practice among companies that have been audited for taxes, but she refused to comment further.

Investors are jittery after tax authorities levied a multibillion-dollar tax bill on Yukos in 2003 and then went on to make back tax claims against several other companies.

President Vladimir Putin sought to assuage business leaders last month with a promise to clean up the tax regime.

Yet No. 2 oil company TNK-BP said last week that it was facing a $1 billion tax claim, and No. 1 LUKoil said it was undergoing a tax check.

"We view the news as positive for Sibneft and indeed for TNK-BP as it shows that oil companies can negotiate down tax claims and that the government is perhaps unwilling to embroil itself in another Yukos-type saga," Troika Dialog said in a research note Monday.

"If accurate, the [Vedomosti] report should provide a strong boost to Sibneft and help firm market confidence overall," Alfa Bank said in a research note. "Since the onset of the Yukos affair, Sibneft has been perceived by many --though not all -- as the potential target for a punitive tax crackdown."

Like Yukos, crippled with a back tax claim of more than $27 billion, Sibneft in the past used tax optimization schemes that were completely legal and allowed it to pay the lowest income tax of all Russian oil majors, said Yelena Krasnitskaya, a corporate governance analyst at Troika Dialog.

In 2001 and 2002, Sibneft paid income taxes of 9.2 percent and 12.3 percent respectively, Alfa Bank said. LUKoil paid 32.3 percent in 2002, while Yukos paid 12.9 percent. The industry average was 21.3 percent that year.

Full information about any Sibneft tax repayment should appear on its 2004 audited accounts, which are expected in May or June.

Christopher Weafer, chief strategist at Alfa Bank, said Yukos was unable to strike a deal with tax authorities because Putin was determined to make an example out of its politically ambitious founder, Mikhail Khodorkovsky.

"By the time it was reported to have offered a deal, the Kremlin was already determined to take back control of a big chunk of the oil industry to help it further its geopolitical ambitions as well as get control over a critical part of the domestic economy," Weafer said.

Meanwhile, a senior Finance Ministry official said Monday that the Cabinet plans to consider legislation to streamline tax inspections on May 5, Interfax reported. Mikhail Motorin said the Cabinet had intended to discuss the amendments last Thursday but rescheduled to get feedback from the business community and the Federal Tax Service.