Statement
by YUKOS oil company in connection with the court decision on collection
of additional profit tax for the year 2000
Posted: 27 May 2004
On 26 May 2004, the Arbitration Court of Moscow (Judge A.A. Grechishkin)
handed down a decision on collecting from OAO NK YUKOS additional
profit tax in respect of the year 2000, together with penalties
and fines, in the amount of RUR 99.4 billion (US$ 3.4 billion) based
on the claim filed by Russia’s Tax Ministry.
In view of the decision, Oil Company YUKOS, addressing more than
60,000 of its shareholders and 105,000 of its employees, considers
it necessary to make the following statement.
Being a good taxpayer, NK YUKOS confirms its readiness to do everything
that may be necessary to comply with the requirements of the government
agencies, if a higher court upholds the legality of the Arbitration
Court decision of 26 th May 2004.
Being responsible to the Company’s employees, Board of Directors
and all the Company’s shareholders for maintaining the Company’s
job positions, property and financial stability, NK YUKOS’
management deems it necessary to explain that:
1. In accordance with NK YUKOS’ corporate governance policy
the Company has always informed its shareholders of any risks, including
those arising from certain features of the Russian tax laws. The
Company’s management closely analyzed NK YUKOS’ taxpaying
practice, which existed in 2000 and in other periods, and did not
discover any risk of non-payment of taxes in excess of the equivalent
of US$ 3 billion in 2000. All the taxes paid by the Company in 2000
amounted to the equivalent of US$ 1,922 billion. During that period,
as well as in the next two years, NK YUKOS was Russia’s third
largest taxpayer by the amount of taxes paid after RAO Gazprom and
OAO LUKOIL, with NK YUKOS paying slightly less than the latter (thus,
between 2000 and 2003 with NK YUKOS’ revenues being 26 per
cent less it paid only 8 per cent less taxes in absolute terms).
NK YUKOS shares the lead with LUKOIL by the amount of taxes paid
per ton of produced oil, and YUKOS’ taxes to revenues ratio
(30-32 per cent) has always been on the level with the average industry
figures.
In view of the foregoing, we cannot find any explanation for the
fact that after three years of numerous inspections and the PriceWaterhouseCoopers
audit the government agency has found, and the court after a short
trial has confirmed, outstanding tax arrears to the federal budget
exceeding twice the average industry figures. According to the tax
service and the court, YUKOS should have paid 59 per cent of its sales revenues
or 107 per cent of its profit confirmed by the international auditor as
profit tax in 2000.
2. If a higher court recognizes NK YUKOS’ obligation to pay
RUR 99.4 billion, US$ 800 million in liquid funds currently available
to the Company might be applied to this end. The expected volume
of the Company’s liquid funds according to the results of
the 2 nd Quarter of 2004 is up to US$ 1,100 to 1,200 million. If
the court agrees to such a manner of payment, the Company will be
able to pay no more than 60 to 70 per cent of the volume in the 3 rd and
the 4 th Quarters.
At present, the Company is under an injunction prohibiting it to
sell any of its property, including the shares owned by the Company.
Until the injunction is lifted, the Company is unable to sell its
assets in order to obtain liquid funds. Consequently, if the Tax
Ministry’s efforts continue, we are very likely to enter the
state of bankruptcy before the end of 2004.
We must inform our creditors and shareholders of this in advance.
3. We must also inform the Company’s shareholders and creditors
of the Federal Tax Service's inquiry into NK YUKOS' 2001 tax payments.
We foresee the risk of the Company being presented with claims similar
to those discussed above.
4. As of today, the Company has not entered into any negotiations
with its shareholders or any persons interested in buying new shares
in order to cover the expected deficit of liquid funds in the case
the court decision is upheld. We only know that no proposals with
regard to the matter discussed above have been received by the Company’s
Board of Directors from NK YUKOS’ major shareholders (Group
MENATEP and Millhouse Group).
5. Acting in the interests of all its shareholders, the Company
will appeal against the decision dated 26 May 2004 of the Arbitration
Court of Moscow and will use its best efforts to perform its obligations
to its employees, shareholders, partners and customers.
Statements on the Company’s development prospects. Some
information in this press release may contain forecasts or any other
statements regarding NK YUKOS’ development prospects or future
financial results.
It should be kept in mind that those statements do not guarantee
the Company’s achievement of any stated results or the occurrence
of any projected events, and include all the risks, uncertainties
and assumptions which the Company is unable to foresee with a high
degree of accuracy.
Accordingly, the Company’s actual results may substantially
differ from the figures and forecasts contained in any statements
on the Company’s development prospects. The Company has no
intention to modify the said statements in order to reconcile them
with the actual results.
For more information see www.yukos.com
Posted by Richard Price,
Editor Pipeline Magazine
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