29.10.08

Number of tax disputes dropped by 17% over the past year. According to a poll of major companies by Ernst & Young, 82% of companies were involved in disputes in 2006. In 2007, this number had fallen to 65%. Also, the majority of cases, 89%, were won by the taxpayer in 2007.

The 78 Russian and foreign companies questioned reported that, over the last year, half of all lawsuits were related to VAT. Another one third of actions were in relation to profit tax. Disputes related to other taxes did not exceed 7%.

During the last year, 65% of cases reached court hearings, which is 17% less than 2006. Tax officials also raised claims similar to those previously lost by them less frequently.

Respondents companied that court cases were taking longer to complete, meaning that they are more costly to businesses. 45% of cases took 6-12 months to bring to completion, and 40% - even longer. No case was completed in under 3 months.

The remaining 35% of companies did not dispute additional tax charges in courts. Even if company does not agree with the charges, if the contested amount is less than the likely legal expenses, the company is not likely to file a lawsuit. Moreover, in many cases tax inspectors estimate “a pain threshold” for each company – an amount of additional charges that the company may be willing to pay without a court dispute and limit their charges to this threshold.

Many expect that in 2008, entrepreneurs’ attitude to courts will become more positive due to a resolution of the Supreme Arbitration Court passed on February 5, 2008 bringing into power a concept of judicial precedent in Russia. At this time companies have not had enough time to experience positive effect of this resolution. 

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Source: РБК daily