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Better investment climate needed for anti-offshore policy proposed by Putin

December 12, 2013, 18:09 UTC+3 Zamyatina Tamara
© AP Photo/Ivan Sekretarev

MOSCOW, December 12 (Itar-Tass) - Russian entrepreneurs and economists approved of the Russian president’s proposal for ‘deoffshorization’ of the Russian economy, announced in his annual address to parliament. Putin said Russian goods in a total amount of $111 billion passed through offshores and semi-offshores last year, one-fifth of the total Russian export. Half of the $50 billions of Russian investment in other countries went offshore.

Putin proposed that foreign-registered companies should not enjoy state support, including loans from Vnesheconombank and guarantees, adding that those companies which want preferences, state support or profit while working in Russia should also have themselves registered in Russia. He believes that taxes on the earnings of Russian companies registered in offshore zones should be levied under Russian rules.

Alexander Dynkin, the Director of the Institute of World Economy and International Relations under the Russian Academy of Sciences (RAS) considers the proposed measures indispensable.

“Calls for deoffshorization of the national economies are a global trend now, the issue was discussed several months ago at the G20 summit in St. Petersburg presided by Russia. Amid the current global economic instability all countries suffer budget constraints. Hence the epidemic, the entrepreneurs’ steady habit to move capital offshore,” Dynkin told Itar-Tass.

However, the expert believes, “bans will not be enough to improve the business climate in the country”.

“Enhancement primarily requires faster procedures of property registration and of connecting facilities to power supply lines and easier customs rules,” he said.

Dynkin is positive about Putin’s idea to establish a common federal web-site to report the results of each inspection. According to Putin, this would show who initiated this or that check, whom it concerned, what were the reasons and, the main thing, what results the inspection yielded.

Welcoming the suggestion, Dynkin believes this web site will be open to the general public, “help step up public control over inspectors to resist corruption and ease pressures on businesses.”

“The identified task to render the economy and financial sector more effective requires a special programme to deal with the money now circulating in the global market. First, Russia needs to create conditions to attract these funds. Then, it needs to create conditions for Russian investors from offshore zones to invest into the Russian economy,” the chairman of VTB bank’s Supervising Council, Sergey Dubunin, told Itar-Tass.

Dubinin believes that to work with offshore partners, “Russia should better follow the EU example and require the companies disclose their end beneficiaries.”

The expert has a positive view of Russia's financial policy, “if, amid this transparency, taxes from offshore zones come to the Russian budget from all kinds of business.”

“Preventing offshore tax evasion is a feasible task,” Dubinin said.

Summing up, he said: “Putin’s deoffshorization task will be realistic under two conditions. Relationship with offshore countries should become transparent, so that Russian businessmen do not evade taxes. And the main thing is to foster conditions in Russia that would encourage offshore investments into the Russian economy, that is to improve the investment climate.”

Meanwhile, Russia's small and medium level entrepreneurs paid attention to Putin’s proposal to introduce two-year tax holidays for newly-founded small businesses, although, the president said, not all governors were going to like it.

“Even so, it will be a useful measure to support start-uppers,” the Vice-President of Business Russia non-governmental organization, Nikolai Ogarkov, told Itar-Tass.


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