Case 7.3 PwC and the Russian Tax Authorities

PriceWaterhouseCoopers (or known as PwC), on of the United States’ “Big 4” accounting firms, has had a tax practice in Russia since that country changed from communist rule. On of PwC’s clients in Russia was Yukos, a major Russian oil company that is now bankrupt.
Russia’s Federal Tax Service, has filed suit against PwC, alleging that it concealed tax evasion by Yukos for the years 2002-2004. The Tax Service also announced a criminal probe of PwC’s conduct with regard to its tax services for Yukos. Twenty Tax Service agents searched PwC’s offices in Moscow and questioned PwC’s employees about the Yukos account. Yuko’s lost its tax case, and has paid $9.2 million in charges for the nonpayment of taxes. However, Yukos and PwC do have the case on appeal.
Many see the battle between PwC and The Tax Service as a part of the Russian government’s ongoing battle to sell of the assets of Yukos and avoid the surrenders of the company’s assets to investor and creditors who have filed the claims. Some analysts believe that the Russian government is hoping to press PwC into revealing information that would help it take back the Yukos assets.
In PwC is found to have engaged in evasion, it loses its license to do the business in Russia, but if it turns over the information, it is likely to lose its clients in Russia.