Will Russia create its own offshore zone?

Will Russia create its own offshore zone?

An offshore zone can be established in Russia, the presidential envoy to the Far East Federal District, Deputy Prime Minister Yury Trutnev, said after a meeting of the supervisory board of the Free Port of Vladivostok.

"The practice of creating offshore areas exists around the world. If other countries consider it possible to pull the tax potential by providing tax incentives, then it can be done in Russia too," Interfax cited him as saying.

Trutnev noted that the Free Port and territories of priority development which operate in the Far East cannot be called offshore zones. "These are preferential zones," the Deputy Prime Minister said.

"In principle, I do not think we should not consider establishing an offshore zone. It is necessary to think about it. We live in a competitive environment. And if other countries are pulling the blanket to their side, we need to pull back or they will take the whole thing," the envoy explained.

The idea of ​​a possibility of creating an offshore zone in Russia was voiced by the Prime Minister Dmitry Medvedev in 2013. "Maybe we should think of creating a kind of a zone of our own in the Far East. We have several good places there - Sakhalin, the Kuril islands," he said, adding that it could help return to Russia the money from other offshore zones.

Shortly afterwards, the Prime Minister said that the government will seriously discuss this initiative, and the head of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin, suggested to open an offshore zone in Sochi.

An associate professor of Stock Markets and Financial Engineering of RANEPA, Vasiliy Yakimkin, speaking with a correspondent of Vestnik Kavkaza, welcomed the idea of ​​creating a domestic offshore.

"The problem of minimizing taxes is worth of attention, so if they create a zone where taxes are much lower than in other places, all investors, manufacturers and other businessmen will use it," he explained.

"Now the government has a problem with stimulating business and our own offshore zone can serve as one of the tools to do that," the expert said.

According to Yakimkin, the country's leadership has always had the task of attracting investments, but it has never been more pressing. "Now, Russian corporations are not investing in any expansion or upgrading of technologies. Most corporations are even holding surplus funds in bank accounts, not investing them," the associate professor of Stock Markets and Financial Engineering of RANEPA noted.

The expert noted that in this sense the Russian offshore is better than foreign ones, because the money will stay in Russia," the expert said, adding that such a zone can be created somewhere in the Far East, for example in Vladivostok.

"The conditions for such a zone are unambiguous. Firstly, it requires reducing the tax burden. Secondly, they need to make the business less transparent. This is especially important for small and medium-sized businesses. Thirdly, it is necessary to significantly reduce the administrative burden," he said.

"That is, no matter in what Russian region the real business is taken to, all the documentation will go through the offshore companies," Vasiliy Yakimkin concluded.

Professor of the RANEPA faculty of Finance, Money Circulation and Credit, Yuri Yudenkov, on the contrary, was skeptical regarding the idea of ​​creating Russian offshore zones, recalling that last week, Vladimir Putin decided to liquidate a number of free economic trade zones.

"It has been proven that they have been ineffective. They were created in order to develop production, create new jobs, but have not met the expectations," he noted.

Against this background, the expert expressed concern that there is a danger that Russian entrepreneurs will use domestic offshore zones only to evade taxes, and foreign investors (from the US, the UK or Japan) will be the least interested in Russian offshore zones.

"On the one hand, our country has taken a lot of effort in the last two years to take out money from foreign offshore zones back to our country. And now we are creating an offshore zone here," the Professor of the RANEPA faculty of Finance, Money Circulation and Credit wondered.

"So it will be either St. Petersburg or the Far East, Primorsky Territory. Less likely it will be Murmansk," he suggested.