Allow me to clarify. Its more that I’m pleased by the fact that Putin is at least starting to repeat out loud what the Foundation for Fighting Corruption introduced two years ago in bill form. However, I highly doubt that the proposals regarding deoffshorization of the economy will be realized, and won’t just remain typical Putinesque promises made by Mr. Promise Maker.
Now let’s you and I listen and read about what Putin said regarding offshores:
[VIDEO OF PUTIN MAKING A SPEECH ON THE DEOFFSHORIZATION OF THE RUSSIAN ECONOMY]
The offshore nature of the Russian economy has become a byword. Experts call this phenomenon an escape from jurisdiction. As per some estimates, nine out of ten business transactions currently being concluded by large Russian companies, including, by the way, companies with state involvement, are not being regulated by domestic laws. We need a whole system of measures for the deoffshorization of our economy. I am charging the Government to bring forward appropriate and comprehensive proposals in relation to this issue.
“There is no doubt that political competition is a good thing for our country. We need to form our own set of rules for political competition in good conscience.”
We need to achieve transparency within offshore companies; the disclosure of tax information, as do many countries during the course of the negotiations process with offshore zones and the signing of the corresponding agreements. All of this can and needs to be done. But if, during the choice of jurisdiction, a matter is decided pro-foreign legislation, then we need to, of course, admit that we need to make corrections to our own deficiencies in our judicial system during the rule making, during the practice of law. It is only by our honest admittance of this, that we can cardinally change the situation.
That’s what Putin said yesterday during his annual address… BUT HOLD ON A MINUTE, HE DIDN’T SAY THAT YESTERDAY.
That was the annual address from 2012. That is, he said that a year ago.
And this year, he repeated it all again.
…regarding the tasks related to the deoffshorization of the economy. There’s one other topic that I’d like to turn your attention to and which I feel is essential to revisit today.
Why? I’ll tell you right upfront, as the results are still barely noticeable. I’ll remind you about the massive deal this year worth more than 50 billion dollars. The sale of shares in the TNK-BP company took place outside of Russian jurisdiction, although the sellers were known entities – they were citizens of the Russian Federation and the buyer was well-known – one of the largest Russian companies.
According to expert appraisals, last year, a combined total of 111 billion dollars’ worth of Russian goods were channelled through offshore or partially offshore companies. That’s one fifth of our entire export trade. Half of the 50 billion dollars of Russian investment in other countries also falls on offshore companies. Behind these figures is the removal of capital that should be working for Russia- direct losses to the country’s budget.
Given that nothing in this sector was done as it should have been for a year, I have some proposals. Here they are:
A company’s revenue, that’s registered in an offshore jurisdiction and which belongs to a Russian owner, the end beneficiary, should be assessed as per our tax rules, and the tax payments should be paid into the budget of the Russian federation. And its essential to think up a system for how this money can be drawn.
There are, by the way, methods; you know there’s nothing here that’s really out of the ordinary. In some countries, such schemes have already been introduced: you want to set up offshore companies – go ahead, but hand your money over here. These methods are introduced in countries with a developed market economy. And this sort of scheme works.
Yet again, experts have told him that everything’s really bad. Yet again, nothing’s been done. You get the feeling that little gnomes were the ones who should have done something; gnomes that you summon by hanging candy on a thread by your bed at night, not your own head of government sitting in the first row.
And what’s especially wonderful is the heartache regarding the largest deal in the history of the country (TNK) having been concluded in offshore jurisdictions. A deal, it would seem, that was also prepared and approved by little gnomes, not by Putin’s closest aide – the swindler and thief Sechin, who jumped from the ranks of civil servant to become one of the highest paid “managers” in Russia, receiving 1.6 billion dollars a year.
Two years ago, RosPil (At the time, there wasn’t yet a FFC) introduced amendments to the Federal Contract System and at that time, we talked about the importance of the deoffshorization of government procurement. We demanded that all participants in state procurement that were established by offshore companies, at the very least, publicly disclose their beneficiaries (their ultimate owners).
We demanded that all subcontractors disclose their beneficiaries before receipt of a contract and so forth.
The only thing that we achieved then was that the successful proponent of a high value government tender will disclose his beneficiary to the client alone (and not to all of us). And if the proponent says ‘to heck with that!’ and doesn’t do it, then there are no sanctions.
And even that is viewed, to this day, as revolutionary.
That’s it, there have been no other real advancements. And I doubt that there will be during the Putin regime: you know, what we need more than anything is deoffshorization, not of the economy, but of the government sector.
Contractors, subcontractors, any suppliers should disclose their owners- not just during government procurement, but when working with government corporations and companies with government involvement.
Government officials shouldn’t be in strange relationships with offshore companies.
This is a schematic of the offshore empire of Yakunin, the head of Russian Railways and Putin’s pal from the “Ozero” Cottage Cooperative.
Even Yakunin’s dacha belongs to the Cypriote offshore company “Mirolo”, and it belongs to two Panamanian offshore companies.
And what’s this?
These are unbelievable offshore schemes that have enabled the wife of another Putin comrade-in-arms, Shuvalov, to earn hundreds of millions of dollars in a miraculous fashion.
And so on and so forth.
This is what you need to deoffshorize, and not some IT company that’s opened a head office in the Netherlands in order to optimize tax and operational efficiencies.
Therefore, the real question isn’t: “Will Putin engage in the deoffshorization of the economy?” but rather “Will Putin engage in the deoffshorization of his thieving friends?”
I doubt it. The affairs of the thieving friends are getting better and better and Mr. Promise Maker is only making promises.
Originally posted by navalny on 2013-12-13 15:31:00