Russian President Vladimir Putin delivers the state of the nation address in the Kremlin, Moscow. (AFP)

Moscow, April 25 (Reuters): Russian President Vladimir Putin, seeking to lift a cloud of uncertainty among investors, told tax officials today to stop ?terrorising? business and tried to tempt Russians to bring their billions back home.

In an annual keynote address, the Kremlin leader said Russia was committed to democracy ? but, responding to sharp western criticism, said it would pursue democracy in its own way and not at the price of law and order or social stability. ?Tax authorities have no rights to terrorise business,? he said in a 47-minute speech in the Kremlin, flavoured with references to the need for establishing a law-based society.

Putin?s emphasis in his State of the Nation address on boosting investor confidence came two days before the verdict was due in the fraud and tax evasion trial of Yukos oil magnate Mikhail Khodorkovsky. He could face up to 10 years in jail if convicted.

The relentless prosecution of Khodorkovsky, which Putin?s critics say is politically-motivated by the Kremlin, scared off investors and triggered a wave of money out of Russia.

Putin sought to roll back the repercussions of the Khodorkovsky affair, pledging to protect business from corrupt bureaucrats and urging Russians to bring back the billions of dollars they have salted abroad out of the reach of the taxman. If they did, they would have only to pay the normal 13 per cent tax rate on their holdings, he said.

The issue of tax risk is one of the hottest facing Russian corporate investors, Standard & Poor?s rating services said today, referring to the case of TNK-BP oil major that has been presented with a tax claim of about $1 billion.

Putin said tax officials should focus on checking current tax bills rather than chasing companies for years of back-taxes. The period for investigating past privatisations should be shortened from 10 years to three. Investors, he said, needed stability rather than ?riddles and charades?.

He used the same argument to justify his record on democracy that has been under fire in the West. Just last week, US secretary of state Condoleezza Rice said on a visit to Moscow that Putin had too much personal power.

The Kremlin chief said a ?special feature? of Russia?s path to democracy was that it would not be undertaken at the expense of maintaining law and order and the stability required to attract investment.

?Russia ... will decide for itself the pace, terms and conditions of moving towards democracy,? he said. This was possible only through legal means, he said.