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Matviyenko calls for gradual deoffshorisation, economic incentives for companies

September 19, 2014, 6:28 UTC+3 MOSCOW
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MOSCOW, September 19. /ITAR-TASS/. Valentina Matviyenko, Chairperson of the Federation Council, upper house of Russian parliament, said de-offshorisation of the Russian economy should be carried out gradually with a whole range of issues being addressed along the way.

“We understand that there is no simply solution and a set of measures will be needed,” she said in an interview with the government Rossiiskaya Gazeta to be published on Friday.

These will include economic incentives for companies to register their business and pay taxes in Russia where they are lower than in Europe, and measures against illegal capital export and unlawful tax optimisation schemes, Matviyenko said.

Experts say that hundreds of billions of U.S. dollars are taken out of the country through offshore jurisdictions. “Most countries have adopted legislation that does not allow such doubtful tax optimisation. The Federation Council has also drafted a package of laws and coordinated it with the government and the Supreme Court,” she said.

The draft laws specify the signs of tax evasion, including the use of fly-by-night firms, offshore schemes and transfer pricing, and provide stricter criminal penalties for illegal tax optimisation methods.

Matviyenko is hopeful that legislation for de-offshorisation of the Russian economy will be ready this year but thinks that companies will need a transitional period to adapt to new rules.

She recalled that this issue had been raised by President Vladimir Putin in his Address to the Federal Assembly (national parliament) in December 2013. Putin said de-offshorisation 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.

As of now, “42% of our foreign trade turnover, and that’s over 10 trillion roubles, go though offshore companies… and we cannot put up with this of course. We must change the situation,” Matviyenko said, adding that this could be done only by amending legislation.

She stressed the need for effective measures to de-offshorise 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 optimisation in offshore zones. This is a whole world where one can easily hide his income and evade fair taxation,” Matviyenko said.

She called for “taking a balanced approach and making such taxation rules for offshore companies that would encourage them to move into Russian jurisdiction… Information about the ultimate beneficiaries of offshore companies should be disclosed, countries should exchange information and many other steps should be taken.”

At the same time, Matviyenko believes that de-offshorisation will require “some sort of amnesty or rather some transitional period so that all companies could adapt to the new legislation and carry out necessary legal procedures to comply with the laws to be adopted in Russia.”

“There should be a dialogue with the business community, a call for patriotism, especially to large national companies. I do not admit of a situation where our state-owned corporations would carry out operations in offshore jurisdictions through their subsidiaries,” Matviyenko said, adding that “this must be ruled out completely.

Also she said that the retirement age in Russia cannot be raised because people are not prepared for that.

“I think the retirement age cannot be raised because people are not prepared for that. But people can be given a choice and encouraged to work longer. I personally advocate this approach,” he told Rossiiskaya Gazeta.

“Let us create economic stimuli for people who want to work longer and who feel strong enough to do so. As a result, they will get a bigger pension,” she said.

Matviyenko said people would oppose a high retirement age. “Life expectancy is growing but it, especially among men, is not yet conducive to that [higher retirement age],” she said.

She believes that “with time people will understand that the retirement age can and should be raised”.
Finance Minister Anton Siluanov earlier this year called for considering raising the retirement age in the country.

“I think that we have to consider this issue anyway if we want to balance the pension system and find additional resources in the federal budget for infrastructure,” Siluanov said.

Another factor to remember is the aging population in Russia: the number of pensioners will match the number of working people in the country in 15 years, he said.

The minister recalled that retirement rules had been adopted in 1932.

“This issue has to be considered and discussed. All countries are going this way. This is a reasonable solution. I think it would be wrong not to discuss it,” Siluanov said.

However, President Vladimir Putin has repeatedly said there is no need to raise the retirement age in Russia.

“It would be unadvisable to raise the retirement age in Russia now as all European countries and our neighbours have done,” Putin said.

“We need to ensure the stability of the pension system, make it an effective part of the Russian economy, ensure its social fairness and guarantee that pensioners’ income is comparable with the average salary of the past several years,” he said.

“We should try to reach the level of developed world economies. Can this be done? It can,” Putin said.

Raising the retirement age in Russia would be unacceptable and unnecessary, he said.

“This is ruled out. If we did this, the retirement age in the country would be 65 years already now for both men and women. We understand that this is unacceptable and unnecessary for Russia now,” Putin said.

The president said pensioners who wish to work after retirement should be allowed to do so.

“I want to stress once again that we have no plans to raise the retirement age. But those who wish to continue working after reaching the retirement agent and want to preserve a good income -- we must create additional conditions for them to earn a better pension,” Putin said.

In his view, good economic stimuli should be created for that but warned that they “must not be imposed but should be stated and offered.”

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