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Amnesty on capital is good news, but yield may prove lower than expected

March 26, 2015, 17:18 UTC+3 Alexandrova Lyudmila
© ITAR-TASS/Alexandr Ryumin

MOSCOW, March 26. /TASS/. Amnesty on Russian capital that may begin to be returned to Russia is a step in the right direction, but one should not expect very high yields, Russian analysts warn. The scale of capital repatriation, they believe, will depend first and foremost on the general economic situation, as well as on how strictly the law enforcers will observe the established rules of the game.

A bill on the voluntary declaration of properties and bank accounts was on the Cabinet’s agenda on Thursday. Now it will go to the State Duma for consideration and may be adopted by the summer.

"The bill declares immunity from criminal, administrative and tax punishment within the framework established by the law and in relation to transactions performed before January 1, 2014, if the wrongdoings committed involved the formation of the declared property items and transactions connected with the acquisition of these assets," Finance Minister Anton Siluanov said at the Cabinet’s meeting.

All those eager to have their possessions and incomes amnestied are invited to submit declarations to the tax authorities by December 31, 2015.

On Wednesday, at a meeting with government members President Putin supported the more liberal amnesty version of the two proposed, the daily Vedomosti has said. According to the bill it will be possible to declare only some assets. Each declarant will be free to choose whether to disclose the entire structure of one’s property or only part of the assets (in that case the amnesty will apply only to the disclosed asset). The amnestied will not have to present any documents to confirm the declared assets. Nor will there be a special declaration fee (originally the Ministry of Finance had hoped for charging an equivalent to 1% of the assets declared).

The amnesty deadlines will be pegged tightly to measures to deoffshorize businesses’ foreign assets. The deadlines for filing declarations under the anti-offshore law on controlled foreign companies will be moved from April 1 to a later date.

The amnesty on capital will possibly be unable to completely compensate for capital flight, but it may prove a factor for easing the outflow of cash, says the Bank of Russia’s first deputy governor, Ksenia Yudayeva. According to preliminary information, the net outflow of capital from Russia in 2014 grew by 2.5 times to 151.5 billion dollars.

The deputy chairman of the Federation Council’s committee for constitutional legislation, Konstantin Dobrynin, believes the amnesty may promote the return of 10% of the withdrawn cash at the most.

True, the amnesty of capital is a step in the right direction, and it is good that the deadline for filing declarations has been extended till the end of the year, the first deputy president of the organization uniting small and medium-sized businesses OPORA, Pavel Sigal, has told TASS.

"I am not expecting a great influx of capital in the current economic situation. Investors are in the process of evaluating risks. The uncertainty over the exchange rate of the rouble plays a major role, because, once the capital is back to Russia, it will have to be converted to rouble cash before it can be invested."

According to the expert, a great deal will depend on how strictly the law enforcement agencies will agree to stick to the established rules.

"There must be the certainty no questions will arise to those who may agree to bring their money back. Strict observance of the rules is very important," he added.

Senior economist Anton Tabakh, of the Institute of Energy and Finance, has warned against excessive expectations. "The entire experience of previous capital amnesties, including those announced in the post-Soviet space, indicates that the expected result should be divided by five, if not by ten," he told TASS. "Kazakhstan’s experience shows that the result of the amnesty was not very impressive. In particular, that concerned large possessions."

He believes that even the forecast repatriation of up to 10% percent of capital is too optimistic. As for the assets belonging to major companies, including state-owned ones, the yield may be greater.

The expert welcomed the choice of the more liberal version of the proposed legislation.

"The harsher the law, the harder it will be to enforce," he said.

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