The federal court of arbitration of the Moscow region on 16 September upheld the decision of the court of appeal to recover tax arrears for 2000 from JTI Marketing and Sales, a subsidiary of Japan Tobacco.

The standing judgement obliges the company to pay US$ 79 million in taxes, fines and penalties. Japan Tobacco's head of public relations in Russia, Anatoly Vereshchagin, told the press his company was deeply disappointed with the decision and planned to take its case to the supreme arbitration court. However, most experts fear that JTI is now within a hair from losing the case. At the same time, “JT International's principled position is strict adherence to the law regardless of the country we operate in”, Mr Vereshchagin was quoted as saying. If the ruling is upheld by all higher courts, back taxes claims can be expected for the years after 2000 as well. The tax authorities, among other charges, accuse JTI of understating the VAT on sales of the cigarettes made by the Petro plant which has an agency contract with JTI Marketing and Sales. The proceedings against JTI are being watched closely by the entire tobacco industry as a message on what the authorities’ intentions are in regard to major tax payers, especially that the scheme when the cigarette making plant is directly linked with a marketing company is used by nearly all major tobacco companies in Russia, not JTI alone. Some of the investors are changing their plans for Russia, e.g. Filtrona is already moving its project a filter making plant to one of the neighbouring countries, reminds Rustabak.ru. (vt)