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Russian government to draft laws on taxation of offshore zones

January 10, 2014, 10:58 UTC+3 MOSCOW
The instructions followed President Vladimir Putin’s orders of December 27, 2013, issued after his Address to the Federal Assembly
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© ITAR-TASS/Dmitry Astakhov

MOSCOW, January 10. /ITAR-TASS/. Prime Minister Dmitry Medvedev has instructed the government to prepare legislative amendments on taxation of companies in offshore jurisdictions if they do not share their income with Russian officials who control them.

He also called for drafting legislative amendments that would make government support unavailable to such companies and would prohibit public or municipal contracts with them.

The instructions followed President Vladimir Putin’s orders of December 27, 2013, issued after his Address to the Federal Assembly (national parliament).

 

Over $1 trillion taken to offshore zones

Russian MPs will discuss deoffshorisation laws as priority during their spring session, Valentina Matviyenko, Chairperson of the Federation Council, upper house of parliament, said in late December.

She stressed the need for effective measures to deoffshorise the economy. “Many experts say that more than one trillion U.S. dollars were taken to offshore zones over the past 20 years,” she said, adding that “this is a sphere that is very hard to regulate at the state level.”

“There are several dozen schemes of tax, investment and corporate optimization in offshore zones. This is a whole world where one can easily hide his income and evade fair taxation,” Matviyenko said.

The Federation Council, the upper house of Russian parliament, intends to discuss de-offshorisation laws during the spring session. “Such proposals have been prepared, we corrected them taking into account the proposals put forth by the president in his Address and we will continue working on this priority topic together with the State Duma (lower house of parliament),” she said.

Matviyenko expressed confidence that the parliament would adopt a set of documents during its spring session that would improve the economic situation in the country, including by means of so-called de-offshorisation, thus increasing federal and regional budget revenues,” she said.

 

Russia to benefit from de-offshorisation

Russia will get tens of billions of rubles from deoffshorisation of its economy, Finance Minister Anton Siluanov said.

“I think we can talk about tens of billions of rubles,” he said.

The minister noted that a set of measures was being prepared, covering three areas. First, companies will have to pay taxes in Russia if they run their operations in the country.

Second, access to government contracts and subsidies should be limited for companies that do not disclose their beneficiaries. “It is an absolutely correct decision that companies should disclose their owners so that we knew where they are registered and pay taxes,” the minister said.

Third, controlled foreign companies that do not pay dividends to their Russian parent companies make it impossible to tax these amounts.

“If such a company does not carry out its activities and does not pay dividends to the parent company, we should naturally hold such a company accountable and compute taxes depending on the activities controlled by the foreign company,” Siluanov said.

The Finance Ministry is drafting legislative initiatives to de-offshorise the economy and hopes that relevant initiatives will be submitted to the State Duma, lower house of parliament, in the first half of 2014.

 

Putin: Deoffshorisation key task in 2014

In his annual Address to the Federal Assembly on December 12, 2013, President Putin said deoffshorisation of the economy should become a key task next year.

“Incomes received in offshore zones should be taxed by our rules, and tax payments should go to the Russian budget. We have to think about how to take this money,” the president said.

Companies registered in offshore zones will not be entitled to state support, including loans from Vnesheconombank, and government contracts. “In other words, if you want to earn money in Russia, register here,” he said.

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