Yukos offers to pay tax in shares

Russian oil giant Yukos has proposed a package of measures to pay off a $3.4bn (£1.9bn) tax bill and help the firm escape the threat of insolvency.
According to Russian media reports, the company wants the government to restructure its tax debts, and plans to issue new shares to free up capital.

But Yukos's shares fell by 12.5% on the news, amid rumours that the Kremlin was not interested in cutting a deal.

Yukos has already said it will go bust if it cannot solve its tax problems.

A Moscow court is currently considering whether the Tax Ministry was right to find Yukos guilty of tax evasion in 2000.

Courting disaster

The tax case is seen as closely linked to a court proceeding against Mikhail Khodorkovsky and Platon Lebedev, two of Yukos's biggest shareholders.

Their trial for fraud and tax evasion is due to start on Wednesday.

Yukos has always maintained that it and its leaders were the targets of political persecution by the government, which was annoyed at Mr Khodorkovsky's support for the liberal opposition.

Yukos's new management has repeatedly tried to arrange some sort of a deal with the government to escape its various legal troubles.

At various times, officials have proposed handing over assets to the state in return for freeing Mr Khodorkovsky, or waiving the tax liabilities.

Holding out

The latest proposal reportedly involves giving the government new shares in Yukos, a move that would sharply dilute Mr Khodorkovsky's 27% stake.

This would require the support of existing shareholders.

According to some reports, the Russian Government is not favourably disposed to the idea, despite the fact that it could thereby become the company's biggest shareholder.

The government has also opposed the idea of allowing Yukos to sell some of its assets - currently frozen by a court order - to pay its tax bill in cash.

Analysts are still uncertain as to exactly what the government wants to achieve by its tough stance on the issue.

HERE