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5 Mar, 2008 17:26

Electrics retailer hit with massive tax bill

Russia’s biggest household appliances chain, Eldorado, is facing a tax claim of more than $US 300 million. Eldorado's owner Igor Yakovlev says he may have to sell off part of the business to pay the bill.

Eldorado has a 28 per cent market share in Russia and Ukraine. Its turnover reached $US 6 billion last year.
The electronics and home appliance retail chain has been charged with non-payment of taxes on a large scale.
Federal tax inspectors launched the audit in 2006 and the preliminary bill is as high as $US 330 million.
The retailer’s spokesman Ilya Novokhatsky says the company will contest the claim in court.
“We have an official act from the tax authorities with this tax claim. Now we are contesting this claim because we do not agree with the sum and we do not agree with the methods by which the sum was calculated,” Novokhatsky said.
Eldorado is not the first large retailer that has recently received huge demands for back tax.
The head of the perfume chain Arbat Prestige was arrested in January for evading tax of $US 2 million.
Retail analyst Tatyana Bobrovskaya says such tax claims have scared off international players who previously were considering the Russian market.
“One of the factors holding them back is the actions of the regulatory bodies here. Only when the risks of tax claims are minimised will we see more international retailers in Russia,” Bobrovskaya said.
These risks are thought to be one of the reasons why the British retailer Dixons did not exercise its option to buy a 10 per cent stake in Eldorado last year, believed to be worth in the region of $US 200 million .
And concerns about the regulatory outlook for Eldorado may limit its ability to find fresh funding on the financial markets.