Metinvest has no tax debt, calls allegations unfounded

Ukraine’s largest steelmaker and iron ore producer
Metinvest (METINV) obtained a confirmation from the state tax service that the
company currently has no tax debt, according to its Feb. 2 press release.

Metinvest was also not presented with any support for
the allegations that it underpaid UAH 18 bln (USD 675 mln) in taxes, the
company said.

The Feb. 1 searches at Metinvest subsidiaries were
conducted with substantial illegalities, Metinvest said. The court order for
the searches was “defective” (lacked a validity period). The searches were
conducted at addresses and on premises not mentioned in the court decisions.
Ukraine’s authorities blocked video recordings of their activities by the
company’s lawyers.

The conduct of Ukraine’s authorities suggests that the
true aim of the searches was intimidation and harassment of business, not
investigative activities, Metinvest concluded. The company pays taxes in good
faith and operates strictly within the framework of Ukrainian legislation, the
release said.

Recall, on Feb. 1 representatives of the Security
Service of Ukraine, the Economic Security Bureau of Ukraine and the Prosecutor’s
Office conducted investigative activities
at four Kryvyi Rih mining enterprises, including Metinvest subsidiaries. The
Bureau said that criminal proceedings for tax evasion against employees of four
mining enterprises have been initiated. Metinvest said that through their
actions, Ukraine’s authorities have appropriated the function of the tax
service and have attempted to circumvent Ukrainian tax legislation by imposing
additional tax obligations on businesses.

Dmytro Khoroshun: The absence
of tax debt confirms that Ukraine’s tax service has not yet succeeded in
confirming its claims against Metinvest in courts.

Metinvest and other Ukrainian iron ore miners have
good chances of proving in courts that their approach to paying royalty was in
compliance with tax legislation, we think.

We maintain our neutral view on METINV bonds.