#5
gazeta.ru
June 20, 2002
Capital coaxed back to Russia
By Olga Proskurnina

President Vladimir Putin has called on Russian businessmen to return funds hidden in offshore accounts throughout the last decade of political instability and excessive taxes. The idea to repatriate Russian capital invested abroad has become very popular of late, with ministers and now the president making proposals for the creation of favourable conditions for the return of capital.

The president, speaking on Wednesday at the congress of the Russian Chamber of Industry and Commerce, urged businesses to contribute to the repatriation of capital. Although, it seems that this call is addressed not only to businessmen.

Debates on the repatriation of capital through a tax amnesty to Russian entrepreneurs who have deposited their huge revenues in offshore banks have been held in Russia for many years now, but until recently, they were mostly of a hypothetical nature.

But things are beginning to change since the International Bank for Reconstruction and Development in Moscow published a report on the situation of the Russian economy. The authors of the report cited that GDP growth is directly linked to the repatriation of fugitive capitals.

A couple of weeks later the First Deputy Chairman of the Central Bank Andrei Kozlov, speaking at the International Banking Congress in St. Petersburg said that presently some $5 billion is being held in the foreign accounts of 7 major Russian banks affiliated with the companies producing raw materials. ''This money should work for the Russian economy, in particular, to give credit to small and medium-sized businesses,'' Kozlov concluded convincingly.

On Tuesday, June 18, the deputy chief of the governmental administrative apparatus Alexei Volin told the press that the Russian government had been receiving proposals concerning the legalization of incomes of Russian citizens, currently in foreign accounts.

According to Volin those proposals are being thoroughly studied, ''although presently one cannot speak of a single, final project for the liberalization of legislation in that sphere''.

At the same time, the government’s envoy to the Supreme, Arbitration and the Constitutional Courts Mikhail Barshchevskiy readily revealed the details of the project to the press. Presumably, Russian citizens who reveal their foreign possessions will be liable to 13 per cent income tax on the whole amount. Of the remaining amount, 25 per cent will be transferred to a Russian bank, whereupon it will be for the account holder to decide whether to transfer the remaining 75 per cent to Russia, or to leave it in a foreign bank.

Barshchevskiy added that at present the funds of Russians stored abroad, are estimated at some $300 billion (approximately the same sum is cited by IBRD experts). Yet, it is no longer profitable for Russians to continue holding their money abroad - even in Sberbank of Russia (a major savings bank) the interest rates on currency deposits are several times higher than in foreign banks.

Besides, in the wake of the fight against international terrorism, the world community has focused more on offshore banks, seeking to unveil the shady sources of financing of the new universal evil. And, what is most important, unlike amnesty, which is offered to those whose guilt has been established in court, legalization of repatriated capital does not imply the person is guilty of some criminal offence.

This is a fundamentally important point. The definition of amnesty in Russian law presumes that it was preceded by some criminally punishable act. Proceeding from that definition, it appears that those who had taken their capital abroad and did not pay taxes on those amounts are automatically considered to be criminals. Given these circumstances, it seems somewhat unlikely that they would readily return their capital, because no one is willing to be called a criminal, whether they are punished or not. Therefore, it appears that the term 'legalization' is more appropriate than 'amnesty'.

Speaking at the Congress of the Chamber of Industry and Commerce on Wednesday, President Putin paid special attention to the problem of repatriation of Russian capital. ''As of today,'' Putin told entrepreneurs, ''huge resources of Russian origin are held in offshore zones in the West. At the same time, Western economies have no interest in that money being returned to Russia. Here, Western economies operate according to the old Russian saying 'don't let friendship interfere with business'.''

Putin also reminded the audience that the international community would continue to apply efforts aimed at tightening up the use of funds in offshore zones in connection with the stepping up of the fight against terrorism. ''I am not telling you that these accounts will be frozen tomorrow, but if that happens… you will wear yourselves out in court trying to unblock your accounts in offshore zones.''

It would be much more sensible, and not only from a patriotic, but from an economic standpoint for the business community together with the government to think about creating favourable conditions for investing Russian resources, including those placed in the West, in the Russian economy, he said.

It is a well-known fact, that the president’s economic adviser Andrei Illarionov treats the idea of repatriation of those resources quite negatively. Not long ago, when Gazeta.Ru asked him to comment on the provisions of the IBRD report on the correlation between economic growth and the return of capital, he said that there is nothing good about tax amnesties for the economy. The capital goes back when there are favourable conditions for it, and then there is no need for any amnesties.

BACK TO THE TOP    #211 CONTENTS    NEXT SECTION