We test the earnings management behavior of Russian companies in the years 2001 and 2002. We analyze the effects of ownership structure on the extent of tax management. We first hypothesize that Russian firms manage earnings downward to reduce income taxes. We test for irregularities in the distribution of earnings in the subsamples of the companies with relatively high and low marginal tax rates in 2001 and 2002, distinguishing between low incentives versus high incentives for tax management. Conducting univariate and multivariate tests, we find evidence consistent with our hypothesis. We secondly hypothesize that incentives to provide high quality financial information constrain tax management. Consistently we find that public companies manage taxes to a lesser extent than private companies. We thirdly test whether the interaction among market forces, political forces, and the changing tax law from 2001 to 2002 caused a change in the reporting practices. We find evidence consistent with public firms reporting earnings of a higher quality in 2002.