Who run the world? W20 women's summit in BerlinWorld April 26, 17:03
Military brass says Russia playing key role in eliminating terrorists’ chieftains in SyriaMilitary & Defense April 26, 15:36
Porsche renews full cooperation with Maria SharapovaSport April 26, 15:05
Russia’s top diplomat slams attempts to obstruct Syria’s chemical incident probeRussian Politics & Diplomacy April 26, 14:57
Russian ambassador says NATO seems unwilling to resume military dialogueRussian Politics & Diplomacy April 26, 14:22
General Staff: US stepping up work to deploy missile defense system to Poland by 2018Military & Defense April 26, 14:18
Putin urges Russian producers to foster competitive market environmentBusiness & Economy April 26, 14:01
Russia not planning to curtail security cooperation with Europe — General StaffMilitary & Defense April 26, 13:54
Saudi Arabia hopes for cooperation with Russia in oil sectorBusiness & Economy April 26, 13:30
This content is available for viewing on PCs and tabletsGo to main page
MOSCOW, January 15 (Itar-Tass) - In the first workweek after New Year holidays the Russian government began to develop measures for what it described as 'deoffshorisation' of the country’s economy.
Russian President Vladimir Putin set this task in an annual state-of-the-nation address to Russia’s parliament, Federal Assembly, last December. The president warned the companies with Russian assets that are registered in foreign jurisdictions that they should pay taxes according to Russian legislation. Meanwhile, these companies are deprived of state guarantees and contracts as well as Vnesheconombank credits.
Vladimir Putin said in his message to parliament that 111 billion dollars worth Russian products - one fifth of the country’s overall export - passed through offshore companies in 2013 alone. Offshore companies accounted for half of the 50 billion dollars of Russian investment in other countries. Russian budget suffered direct losses from this.
Several Russian companies already stated that they had withdrawn from offshore zones, but this cannot be named a trend yet. Russia has been speculating about deoffshorisation already for a second year, but the volume of assets accrued by Russian companies abroad shows no signs of shrinking. These assets exceeded 130 billion dollars at the end of 2013, the RBC Daily said.
Therefore, Russian Prime Minister Dmitry Medvedev instructed the Finance Ministry and the Ministry of Economic Development to draft several amendments in the legislation envisaging taxes on the revenues of offshore companies in Russia. The country’s Cabinet will also work out several amendments in the legislation, banning state support measures to such companies and state contracts with them. These measures should be put into practice before May 2014.
“The fulfilment of these measures will raise additional billion-rouble revenues for the budget,” Finance Minister Anton Siluanov believes.
Experts polled by the Itar-Tass Political Analysis Centre suggested that “offshore loopholes” should be plugged to the benefit of those who run their business according to the rules.
“Deoffshorisation of the Russian economy is timely. I believe that re-orientation of the taxation system in favour of those who run businesses in Russia in compliance with the rules is needed,” a co-chairman of the all-Russia public organisation Business Russia, Aleksey Repik, believes. In his view, companies should be provided with equal conditions for business and seek a situation where offshore schemes will cease to be a factor of making the company more competitive.
“The state authorities have launched a policy for the repatriation of capital from the offshore zones into real economy sector. Special terms for investment in East Siberia and the Far East and some tax benefits will be provided for this,” the head of the centre for economic studies at the Institute of Globalisation and Social Movements, Vasily Koltashov, noted.
Meanwhile, far from all experts share the optimism of some of their colleagues. “Offshore companies are usually controlled by one or several individuals and offshore profit comes ends up in the hands of these select few, including foreign citizens. It is impossible to make them share this profit,” RBC daily quoted lawyer Vladislav Dobrovolsky as saying.
“We should use the carrot rather than the stick. Russian businesses operate offshore companies to protect themselves from hostile takeovers and also because foreign jurisdictions are much more convenient. Therefore, the deal of the century for Rosneft’s purchase of the TNK-BP oil joint venture was done through offshore companies. Russian property rights legislation should be improved,” the chairman of the board of audit consulting group Gradient Alpha Pavel Gagarin believes.
More than 20,000 Russian companies operate in offshore zones on different schemes. The most popular jurisdictions are the Netherlands, Cyprus, Switzerland, Luxembourg and British Virgin Islands.
“Ninety percent of major Russian companies are registered in offshore zones, so the settlement of this problem cannot be delayed any longer. Major offshore companies can bypass restrictive measures of the government quite easily, registering a daughter company in Russia and receiving contracts and credits through it,” the director of the Institute of Globalisation Problems Mikhail Delyagin told Itar-Tass.
The expert voiced the most radical view on economic deoffshorisation ways.
“All property of Russian business should be registered. The state authorities can declare that if the offshore property of companies is not registered in Russia within a year, it will be found abandoned and will be nationalised without any compensations.”
But this is probably an extremely harsh measure. The Ministry of Economic Development told the media that for the return of companies into Russia a large amount of work should be done to shape a comfortable business environment, improve investment climate and make Russian jurisdictions more attractive.
ITAR-TASS may not share the opinions of its contributors