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Wednesday, July 19, 2017

Offshore scandal in favor of the Kremlin

Released new data on materials investigation “Panama records”, which contain information about more than 6 thousand Russians – the owners of offshore companies.

photo: Gennady Cherkasov

International consortium of investigative journalism (ICIJ) presented a new database on owners of offshore companies from the so-called “Panama records”. It was more than 2 thousand Russians, which owns 7.3 thousand offshore companies. The next day, yesterday, the database was updated – the number of Russians in it amounted to 6.3 thousand companies – 11.5 thousand

For those who missed the first action of this entertaining show, let me remind you its summary. April 3 for the first time documents were made public by the Panamanian law firm Mossack Fonseca, which contained, in particular, data on the offshore presence of 140 politicians and civil servants from more than 50 countries, including 12 current and former world leaders. Just “Panamanian dossier” contains 11.5 million documents) and what we see now, and maybe more than once seen – this, apparently, attempts to gradually systematize this data.

The scandal erupted serious – the many heads of state and senior officials had to give a public explanation. Was no exception and our country, as among the defendants in the “Panama records” was one of the friends of the Russian President. The Kremlin has repeatedly stated that the main objective of the scandal – the organization of information attacks in order to discredit the Russian leader. Among the potential “customers” this was called our “overseas partners”, the experts noted that an indirect confirmation of this can serve as the almost complete absence in “Panamanian lists” of Americans.

Meanwhile, a week after the start of the scandal were published with claims that the leaks “the Panama document” could be Russia. The arguments were the following: Moscow is practically not affected by the scandal, since in these papers there is practically no information about the direct connection with the offshore Russian officials and politicians, and in a difficult situation were a few of the leaders of the powers, with which Russia has not the best relationship. In addition, it was argued that the proposal to transfer the data of the firm Mossack Fonseca to the German newspaper Süddeutsche Zeitung, which they originally published, presumably came from the hacker, which was supported by the Russian government.

I must admit, initially, this version looked like a complete victory “conspiracy theories” over the mind – in other words, looked like a complete nonsense. However, ironically, the current publication of the “extended” lists says that if the Kremlin and has nothing to do with these publications, then, at least, he would have had something like that come up in the absence of bananagate”. And here’s why.

Offshore companies are mainly used for three purposes: transactions in “good” jurisdictions, tax evasion, legalization of shadow incomes. Moreover, if Western businessmen mostly just trying to optimize the taxation, for Russian the most significant motivation has always been the possibility of carrying out transactions in foreign jurisdictions – largely due to the shortcomings of Russian legislation and judicial practice in the sphere of protection of investors ‘ interests.

Since the beginning of 2013 the Russian authorities are actively pursuing a policy of de-offshorization of the economy. So, a law was passed, according to which by 1 April 2015, all Russian taxpayers were required to disclose on their direct or indirect participation in foreign organizations; also was declared a “capital Amnesty”, which allowed businessmen without losses and without fear of persecution to return money home.

However, if state-owned companies close to the authorities and the business quite actively return the money to Russia, then other entrepreneurs to do it, apparently, not especially in a hurry – affected the traditional distrust of the domestic state system and justice. At the end of last year, the Russian authorities have actually recognized the failure of the Amnesty of capital and noted the poor state of information exchange with foreign tax authorities.

From this point of view the publication “the Panama document” – a real gift for Russian tax and law enforcement agencies. There is more than enough reason to ask a number of uncomfortable questions involved in the data, and even to take in their relation investigatory actions. Without the “bananagate” it was very difficult – I would have to explain where did the information about these accounts – could not the same because, in fact, the Russian government to hire hackers to steal it. As for the possibility of “Panama records” close to the authorities businessmen is not particularly scary: the appearance of a person in the list allows the law enforcement and tax authorities to actively engage them, but does not oblige them to do so.

Nikolay Solabuto,

managing Director UK “Finam Management”


Natalia Yurchenkova, BGP Litigation lawyer:

At the micro level, the effect of offshore manifested in improvement of property rights protection and increase of companies ‘ profits, and at the macro – as a reduction of the tax burden and improving the global investment climate. The necessary offshore-based foreign markets to big business, so as simplify the process of attracting cheap funding and create a more effective framework for resolving corporate disputes. Business structuring using offshore companies used in the conduct of mergers/acquisitions, conduct an IPO on the foreign financial markets in order to minimize legal risks and risks of default.

The offshoring of the Russian economy negatively affects the investment climate of the country. Since 2008, Russia is among the top ten countries in the world, leading to the inflow and outflow of foreign direct investment. While offshore investments of Russian business structures: deposited in the accounts of countries with preferential treatment; is invested in a third world country; heading back to Russia. These processes do not allow to accurately assess the volume of inflow and outflow of foreign direct investment, and to analyze their distribution across sectors, which prevents the formation and carrying out investment policy aimed at economic growth and sustainable development of Russia. In addition, there is an increasing threat to economic security, a more complex financial budget planning in the context of a serious risk of reducing its revenues, and intensified social inequality in the face of “an offshore, with beneficiaries receiving basic income in Russia and investing their capital abroad.

Irina Badmaeva

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