McDonald's faces 3m back-tax bill in Russia

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The Independent Online

Russia's tax authorities have demanded millions of pounds worth of back taxes from the local operations of the fast-food giant McDonald's, it emerged yesterday, sparking fears that they plan a new wave of claims from both Russian and foreign-owned companies.

Documents obtained by the newspaper Kommersant revealed that the company, which has 183 outlets in Russia and plans to open another 40 next year, was slapped with a retrospective tax bill of more than 3m in August.

McDonald's was accused of obtaining various ingredients from unlicensed companies, and selling milkshakes, ice cream and Chicken McNuggets at a discounted tax rate for which it did not have proper documentation.

A spokesperson for the Russian Tax Service said that McDonald's, by using unlicensed suppliers, had posed a threat to Russian society. The company denies it is liable for additional taxes, saying it did not know about the suppliers' registration problems, and that all its food meets European standards.

Analysts say that Russian tax law is fiendishly complicated, and until recently many companies have operated tax reduction schemes of one sort or another. In one popular scheme, a company employs disabled people, who do not actually work, to gain tax breaks.

However, since the dissolution of the oil company Yukos and the imprisonment of its chief executive Mikhail Khodorkovsky, which was ostensibly based on claims of unpaid taxes, many firms across all sectors have begun to clean up their act.

Now, say analysts, many companies actually pay more than they are required to by law to ensure that all of their bases are covered.

But the risk of back-tax claims still remains. Other companies in the food and drink market have also been targeted recently, with Sun InBev, part of the Belgian InBev drinks group, under suspicion of tax evasion, while Nidan, a juice manufacturer, was also hit with a claim that it was illegally selling juice as "baby food" and thus gaining an improper tax reduction.

Disquiet about possible tax claims has until now been limited to investors in Russia's energy sector, with a worry that political scores could be settled with a sudden interest in a company's tax history, as is widely believed to have been the case with Yukos and Khodorkovsky.

"With regulations being flouted regularly, moves against a company might simply be down to a vendetta," said one Western accountant working on the Russian market. "Or, it could be meant as a signal to other companies that violations will no longer be tolerated."