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Tobacco companies owe Russia $500 mio

Philip Morris International (PMI) paid RUR 243 bln ($3.8 bln) to the Russian budget in taxes additionally charged for 2015, 2016 and 2017 after an inspection by the Russian Federal Tax Service. This amount includes penalties and interest.

In 2017, tax authorities discovered evidence of tax base erosion ahead of a tobacco excise duty hike. It was revealed that the tobacco company had been prioritizing stock production that is, had been producing tobacco at old rates in order to sell it later for a higher profit once the excise duties have increased. Other tobacco companies in Russia fell back on the same strategy. Therefore, the tax service made a decision to charge additional excise duty at the rate of 30% if a company’s cigarette production is higher than the average monthly production volume during the previous year.

The other companies charged additional taxes by the Federal Tax Service include British American Tobacco, Imperial Tobacco and Donskoy Tabak (part of Japan Tobacco International, JTI). The aggregate charges exceed $500 mio.

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