Tax Service Takes Aim at Auditors
// Move Echoes a Similar Initiative from the Bank of Russia
Tax officials, following the lead of the Bank of Russia, have recently taken an interest in confidential audit information. Several regional offices of the Russian Federal Tax Service (FNS) have threatened auditing companies with tax inspections if they refuse to disclose confidential information about their clients. Observers in the market believe that the move is part of a quiet campaign by the FNS to increase federal control over the field.
Kommersant has obtained a copy of a telegram from Interregional FNS Office #10 in St. Petersburg in which the FNS "urges" audit companies to "immediately" supply information on a broad range of questions. In particular, the auditors are requested to inform the federal tax officials about their expenditures, provide lists of names of the companies that they work with and the services that they offer, and report the submission of amended tax and income invoices by any company "together with reasons for any corrections that were made in the [company's] account books and/or tax returns." The vice president of the St. Petersburg Audit Chamber, Dmitry Zheltyakov, confirmed for Kommersant that his office had received the request from the FNS. According to Mr. Zheltyakov, at least five similar requests were send to companies in the region, including Inaudit, Severnaya Pchela, and C-P-A Corporations. Kommersant was able to determine that the notices were also sent by regional tax officials to auditing companies in Belgorod Oblast and Khabarovsk Krai, although the names of the companies remained unspecified. However, representatives from several professional auditing associations, including the Russian Audit Chamber (APR), the Russian College of Auditors (RKA), and the Institute of Professional Auditors (IPAR), confirmed that they had also received the notice. In the opinion of APR President Boris Sokolov, the latest move by the tax police testifies that "the tax service is conducting a nationwide campaign to try to collect confidential information from auditing companies."
The FNS is not the first government agency to make a grab at the confidential information collected by auditing companies. As Kommersant reported on March 7 of this year, the Bank of Russia has unveiled a similar initiative. The Central Bank hopes to enshrine its demands in law, however, while the tax service has apparently decided to forge ahead without any legal grounds. The regional tax inspection service in St. Petersburg told Kommersant that the request sent to the auditors is a local matter. In particular, Oleg Turovtsev, an official from Interregional FNS Office #10 in St. Petersburg, told Kommersant that "this is a planned inspection and we are carrying it out within [our] region." According to Dmitry Zheltyakov, "we have no right to supply such information, because that would be a violation of both the law 'Concerning Auditing Practices' and our agreements with our clients." He added that the companies that make up St. Petersburg Audit Chamber have refused to comply with the demand from the FNS to release classified audit information and that the Chamber has appealed to the city's tax office with a request to resolve the situation according to the law.
The request from the FNS has been met with unease in the auditing sector. "Even a single incident will have extremely negative consequences for the cooperation between clients and auditors and will lead to total destruction of trust in auditors," said Vneshaudit assistant director Svetlana Legostaeva. According to Business Audit general director Dmitry Pavlov, "no one will voluntarily use their money to hire people to gather dirt on them."
The move by the FNS to gather confidential auditing information, following as it does so closely on the heels of the initiative by the Central Bank, has led many in the market to speculate that the two events are part of a larger government campaign. Experts fear that other federal monitors will soon start showing interest in such information and that the trend may gain enough momentum within the government to become a nationwide problem. "This is an attempt by the government to rake in dirt that it has not bothered to dig up itself," said RKA chairman Alexander Ruf. "But auditors are not quiet partners in or contractors for the government." According to Dmitry Pavlov, "as long as these demands are not backed up by legislation, auditors will simply toss them in the trash, and if [such legislation] comes to pass, many will leave the market."
The demand could conceal yet another hidden threat to auditing companies. The information that the tax service is requesting includes data on income growth trends of auditing firms, expenditures broken down by category, lists of consulting services provided by the company, lists of people and companies who request such services, evidence of any complaints that have been lodged against individual auditors, and information about foreign employees at the company. Experts warn that such a volume of information could serve as grounds for any number of inspections. However, the example of the suit brought at the end of 2006 by Moscow Tax Inspection Office #5 against the auditing company PriceWaterhouseCoopers, which was accused of helping Yukos to dodge paying taxes, will undoubtedly serve as an example that will force the auditors to be more accommodating.
Alexei Lampsi and Svetlana Demetieva
All the Article in Russian as of Mar. 09, 2007
|
