Actuality, November, 15, 2007

According to the taxation aspects research conducted by the Ernst & Young Company, the tax reform continues in Russia.

It is directed on regulation of transfer pricing and companies’ tax treatment. However many companies are not satisfied with the taxation reform carrying out rates.

They are disappointed with the tax authorities’ inconsistency in the tax laws application and interpretation.

In 2007 Ernst & Young Company conducted a taxation aspects research among 58 Russian and international companies that run their business in Russia.

“Our research has revealed some interesting tendencies and has come to the next conclusion.

The amount of the companies that have marked positive changes in the tax bodies’ relations, has increased from 22 % up to 32 % for the last year”, pointed out Rice Jenkins, the partner of Ernst & Young Company services of the taxation and rights sphere department (that conducted this research). “This quite positive estimation has been given in spite of many taxation aspects trials in Russia”, added he.

According to the survey, in 2007 only 12 % of interviewees declared that they had been undergone many times to exit tax checks in comparison with 40 % in 2005. 84 % of interviewees had tax controversies (82 % treated them in court). Among the cases came down to court, 89 % were won by the interviewees.

According to the Ernest & Young experts, these facts show “the considerable judicial authority support to the taxpayers”. The majority of tax controversies (63 %) have been settled during the time, not exceeding one year.

At the same time the majority of interviewees consider that the existing tax treatment has a negative influence on the investment climate. So, 63 % of interviewees consider the Russian taxation system influence as “negative” and “extremely negative”; while the part of neutral and positive estimations has decreased from 54 % up to 37 %.

The interviewees consider the tax laws to be the sphere where the most significant changes are required.

They would like the tax reforms to provide the tax laws ordering and decrease of ambiguous interpretation of

laws, conflicts and legislation blanks.

The majority of interviewees (72 %) managed to receive a compensation of value added tax (VAT) at the rate of 90 % and more. They also pointed out the necessity of VAT compensation acceleration terms.

At the same time, according to the research, 90 % of the 31 % interviewed (that have the export VAT compensation right) meant the sums much more than $1mln. The research has also shown, that the average VAT compensation delay term makes up two months that is much less in comparison with the last year results (7,6 months). So informs Ernst & Young.

Ernst & Young is the leading international company on rendering of professional services in the audit, tax consultation spheres and also in deal consulting

services. In the company work about 114 thousand employees in 140 countries all over the world.