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In his state of the nation address on Thursday, Putin announced an all-out amnesty for offshore capital to return Russian capital from foreign jurisdictions.
This process, however, may be impeded by distrust for Russian courts, entrepreneurs said.
Capital amnesty can be implemented in two formats. One option is tax amnesty when an owner of ‘grey money” pledges to return capital and pay taxes on it and is relieved of penalties and criminal liability. This scheme was used in Russia in 2007 but without a success.
The second option is full amnesty with the legalization of funds that were not taxed and were possibly used in breach of other laws. Traditionally, these funds hide in offshore jurisdictions.
Signals sent by the state are important for business as entrepreneurs are not last on the list of the state’s priorities, core shareholder of Magnit retailer Sergey Galitsky said.
“I very much hope that capital will return. But everything depends on how this will be prescribed in law,” investor and minority shareholder at Sistema holding company David Yakobashvili said.
“It is necessary to ensure that no one ever asks where capital comes from. This should apply to both officials and businessmen. Law should be common for all,” Yakobashvili said.
But distrust for Russian courts may impede the process of returning capital from abroad, mobile phone retailer Svyaznoy founder Maxim Nogotkov said.
“Contracts with foreigners are signed under English law. Foreigners would not sign a contract with a Russian legal entity as there is no trust for Russian courts,” he said.
“Now the state of the Russian economy, its stock and foreign exchange markets is not conducive to large-scale investments because risks are high,” Uralsib Capital expert Alexei Devyatov said, adding, however, this issue was more essential for investors with legal funds.
“Many people who earned money by not quite legal means would want to legalize it,” he said.