TNK-BP, the 50% BP owned Russian oil company, has become the latest Russian energy outfit to be stung by a massive retrospective tax demand from the country's government.
Russian authorities have reportedly issued a demand of nearly $1 billion from the joint venture oil enterprise. The bill, which involves taxes dating back to 2001, asks for 26 billion rouble, the equivalent of GBP495 million or $936 million.
The tax demand has stunned TNK-BP management, which said that it would consider legal action if could not agree a compromise with Russian authorities. Quoted by the BBC, Viktor Vekselberg, a member of TNK-BP’s board, commented, We can’t have back tax bills of such a size for this period…We are going to hold talks with authorities.
While lucrative for the Russian government, this latest multi-million dollar charge could be seen as a risky act. While income from taxing wealthy energy companies taking advantage of Russia’s considerable natural resources is a strong source of money for the Russian government, a continued policy of hitting companies with big tax demands could scare them off altogether.
Large energy companies like BP are already nervous in the wake of the Yukos saga, in which the Russian oil giant collapsed under the crippling pressure of a $27 billion tax demand from the state authorities before having its most valuable businesses stripped from it and place in state control.
The move could be seen as counter productive to coinciding efforts by Russia’s leader Vladimir Putin to attract more investment into the fragile Russian economy. However, industry onlookers have suggested that as Russia tightens its control of its industries, more backdated tax bills could be on the cards.