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Russian Tax Official Arrested Over Nestle Audit

Monday, March 1, 2010

The Russian Ministry of the Interior has instituted criminal proceedings against the Deputy Chief of the Federal Tax Service Inspectorate for the Kirov district of Samara, Vyacheslav Kozhina, for obstruction of legitimate business through abuse of authority. Prosecutors considered that the tax authorities had illegally commenced insolvency proceedings against a Nestle owned confectionery company.

If the case is proven, Kozhina could face a fine from RUB80,000 to RUB200,000 (USD6,670), prohibition on holding a official position for up to three years, and 120 to 180 hours community service.

The Russian Federal Tax Service in the Samara region had petitioned the Samara courts for liquidation of the Nestle owned confectionery factory "Rossiya" in October 2009 for reasons of insufficient share capital after a loss-making period.

Howewer, negative financial results for a year cannot reasonably be used to force liquidation. According to the law on joint-stock companies, liquidation is only possible after the value of a company's net assets is less than the size of its minimum charter capital for several consecutive fiscal years, the Moscow Times was advised at the time in a statement released by Nestle.

The Nestle spokesman, Andrei Bader advised that the Nestle company Rossiya had ceased to be unprofitable and taxes had been paid on time and in full. Rossiya had not been the instigator of criminal proceedings, Bader added.

It was not the first time that Samaran authorities have clashed with foreign investors. Earlier in 2009 Ikea made public complaints on Swedish radio, reported by Handelsblatt and Business Week, about irregularities in its dealings with the authorities in Samara that caused a delay of more than a year in the opening of its 12th Russian outlet within a Samara shopping mall; in June Ikea announced it was putting its Russian investments on hold.