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Increasingly Fewer Tax Disputes


According to data from the Supreme Arbitration Court (SAC), courts examined 346,000 civil cases in the first half of 2009 as compared to 208,000 in the first half of 2008, a 67% increase. The number of cases between a business and a government organ grew by only 4%, from 178,000 to 185,000.

Judging by the statistics, the most sensitive topic between companies seems to be disagreements over the fulfillment of supply contracts, which caused 80,000 disputes - a 31% increase in comparison to last year. However, an unprecedented growth in the number of disputes related to insurance was the most critical factor. While there were 8,700 such cases in the first half of 2008, the first half of 2009 has already seen 34,700 such cases – a 300% increase.

Lawyers say that insurance contracts are now being signed that the agency never intends to honor. Underwriters expect to deny claims and avoid payments, and policyholders expect to fight to get reimbursed, regardless of how well-founded the claim is. Legal experts explain that the economic crisis is largely to blame since it has left businesses short on money.

Taxes remain the main point of contention in disputes between business and the government. However, the SAC recorded an unexpected drop – the number of cases involving the tax authorities fell 13% in comparison with the same period last year. However, this drop is somewhat misleading: beginning in the fall of 2008, companies started filing returns on value-added tax (VAT) quarterly, rather than every month. Now complaints concerning VAT issues (which account for a major portion of all tax-related disputes) are filed four times per year, not twelve. A second reason is that in 2009 a norm was introduced that stated a company could file a claim against the tax inspection only after it received a response to the complaint from a higher tax authority, such a regional or federal office.  As a result, January and February of 2009 saw very few tax disputes in court as people waited for responses.

Courts do not appear to be favoring the tax authorities more often because of the financial crisis. Indeed, taxpayers are continuing to win about 70% of court cases. The courts are only taking harder stances in cases involving “fly-by-night” companies. Also, in cases where a company’s supplier has disappeared, the tax authorities are refusing to accept VAT deductions or expenses for calculating the profit tax, meaning that companies should be very careful when choosing new suppliers during the crisis .

The tax authorities have placed the blame on such large retail chains as Svyaznoy, Tehnosila, and Eldorado for their dealings with “fly-by-night” companies. This is a problem affecting all types of business and is impossible to completely protect oneself against. No matter how cautious companies may be in their choice of business partners, they will ultimately take the blame for any imprudent choices, and not the con-artists who run the shady companies, legal experts say.

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