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Russian Court quashes decision to charge PwC extra $15 mln in back taxes

The presidium of the Supreme Arbitration Court quashed a ruling by the lower court demanding British-based PricewaterhouseCoopers (PwC) pay an additional 390 million rubles ($15 million) in back taxes for 2002. 

The decision followed an appeal from PricewaterhouseCoopers, stating they had paid all back taxes in full. The case will now be reconsidered by the Arbitration Court. Originally, federal tax inspectors made the controversial decision to charge PwC further tax arrears in mid-February 2006. Tax authorities accused the auditor's Russian subsidiary of illegally cutting the flat rate of profit tax for sums paid to PricewaterhouseCoopers Resourses B.V., a company expected to provide financial services to PwC's clients in Russia. But the tax authorities said the auditor's Russian subsidiary had done the work instead.

Tax inspectors said PwC owed an additional 128 million rubles ($5 million) in profit tax and 117 million rubles ($4.5 million) in value added tax (VAT), and also 144 million rubles ($5.6 million) in interest and fines. The Arbitration Court ruled to cut the debt only by 2.4 million rubles (roughly $90,000). The Moscow offices of PwC, whose license to operate in Russia was extended for five years in April, were raided in early March over allegations of the $9 million tax evasion, which the company denied.

PwC clients in Russia include the Central Bank and Russia's electricity monopoly Unified Energy System. The company won a tender in April to audit Russian state-controlled energy giant Gazprom, its client since 1995. The AvtoVAZ auto maker did not extend its contract with PwC. (