Russia’s Finance Ministry reported that there are good reasons to include Cyprus and Luxemburg on the blacklist of offshore areas. On November 28, daily Vedomosti published it referring to Ilya Trunin, the Chief of the Tax and Customs Policy Department.
Last week, the Global Forum on Transparency and Exchange of Information for Tax Purposes named Luxembourg and Cyprus as incompliant with the standards of transparency, Trunin explained. The international forum with the G20 mandate thinks that both countries are not able to provide the full scope of information.
Nowadays, Russia’s tax police are not capable to enforce the anti-offshore law to the full, as nearly a quarter of all requests from the Federal Tax Service to other countries meet no response. Trunin states that such requests are disregarded by the countries which do not take part in the information exchange on the legal basis. So, Luxemburg and Cyprus did not enter into the agreement.
If the Finance Ministry decides to add Cyprus and Luxembourg to the blacklist, this will put an end to some Russian tax optimization schemes. For example, at present, export revenues could be pocketed by Luxembourgish and Cypriot entities if goods from Russia are sold to them at reduced prices. Such transaction could fall under supervision only if an entity is formally affiliated with a Russian company, but companies easily conceal this fact. If a country is on the blacklist, supervision will automatically cover prices of all transactions if their volume totals RUB 60 milion during a year. The consequences are serious, the experts pointed out that from now on companies will have to substantiate prices and send notifications about transactions. Moreover, not only export and import deals are supposed to come under control, but also fees for consulting services as well as charges of interest and royalties.
In June 2013, President Vladimir Putin pledged that Russia like the other G8 countries should prepare a draft to fight against offshore schemes and assigned to work out appropriate regulations. Currently, the Federal Financial Monitoring Service, the Ministry of Economic Development, and the Finance Ministry are developing the draft.
