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Russian court quashes $11.8 mln back tax claim vs. Ernst & Young

MOSCOW, January 27 (RIA Novosti) - The Moscow Arbitration Court quashed on Tuesday back tax claims against auditing firm Ernst & Young totaling 390 million rubles ($11.8 million).

The 2004 back tax claim was filed by Russia's tax authorities against the Russian subsidiary of Ernst & Young, one of the "Big Four" international auditing firms.

In December 2007, Russian tax authorities accused the auditor of illegitimately underrating its 10.5 million ruble profit ($318,000 at the current exchange rate) for 2004 by 630.3 million rubles ($19 million).

The company said the sum was for the payment of services rendered by its parent company in Cyprus as personnel had been involved in the audits of Russian clients. However, the tax authorities said the company's claim that payment had been made to consultants outside of Russia was ungrounded.

In a similar case, Russia's Higher Arbitration Court quashed on January 20 a 260 million ruble ($8 million) back tax claim against auditing firm PricewaterhouseCoopers (PwC).

In February 2006, Russian tax authorities accused PwC of illegitimately underrating its profit tax base in 2002 by transferring money to the Dutch PricewaterhouseCoopers Russia B.V. for services provided by foreign specialists to Russian clients. The tax authorities claimed that in reality the services were provided by staff at the auditor's Russian subsidiary.

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