This article argues that Russia has not established a legal system that protects owners of property. Wealthy individuals and businesses believed that their capital was safer outside of Russia. They registered their businesses in Cyprus, and money flowed from Russia to their shell corporations in Cyprus. The money was returned to Russia as foreign direct investment. The profits were taken in the Cyprus shell companies and were taxed below the Russian tax rate. The records kept in the shell companies were also not available to Russian authorities.
The failure of the banking system in Cyprus ended that game. There are other places where that game can be played. Tax havens like The Netherlands and Luxembourg are more than eager to replace Cyprus. This seems to be a growth industry. Tax avoidance and money laundering are not unique to Russia. It is just another way in which globalization presents risks to the nation state. Money has no nationality, and neither do many of our corporations.
No comments:
Post a Comment