Russia Sends 'punitive' Tax Bill to British Council

Relations between Britain and Russia touched a low point yesterday after the British Council in Moscow said it had received a "punitive and disproportionately large" tax bill from the Russian authorities.

Russian tax officials sent the demand in May, the council said. They also threatened to send bailiffs to seize books, furniture, poetry, and computers from the council's Moscow office unless the bill was paid in full, it added.

The demand is the latest in a series of hostile moves by Russia against the cultural organization. It follows the closure in January of the council's regional offices in St Petersburg and Yekaterinburg and the intimidation by the FSB - Russia's post-KGB spy agency - of local staff.

The Kremlin has admitted its campaign against the government-funded body is linked to the row over the murder of the Russian dissident Alexander Litvinenko in London in November 2006.

Britain expelled four Russian diplomats last summer. This followed Vladimir Putin's refusal to extradite Andrei Lugovoi, the former KGB agent accused of Litvinenko's murder. Russian responded by kicking out four British diplomats.

The council yesterday described the tax bill - which covers the years 2004-2006 - as "incorrect". It follows an inspection last year. The council is taking legal action in Moscow's Basmanny district court to have the bill overturned. A preliminary hearing will take place tomorrow.

"The British Council has received a tax claim from the Russian authorities. We dispute most of it. We are going to court to challenge it as allowed under Russian law," a British Council spokesman told the Guardian yesterday.

He added: "We are following common procedure in Russia and challenging certain elements of the bill we consider incorrect. The British Council is registered for and pays tax in Russia. It has complied with all requests from the tax authorities in respect of its activities."

This latest squeeze on the council comes at a time when British-Russian relations appeared to be improving, following Dmitry Medvedev's inauguration last month as Russia's president. Medvedev will meet Gordon Brown during the G8 summit in Japan in July.

Yesterday Tony Blair - who was attending a private investors' conference in Moscow - admitted relations between London and Moscow had been "difficult".

"I've been out of office a year but I still remember the diplomatic language," he said.

Blair - who had dinner with Putin on Tuesday - said the west was still coming to terms with Russia's new economic might.

"We go on holiday in the winter to Egypt. We've seen the number of Russians go up from about 10% in the hotel to 50%," Blair noted.