March brings no relief to the world economy

HomeNewsMarch brings no relief to the world economy

Private liabilities in Russia exceede 12 trillion roubles

The aggregate liabilities of Russian domestic bank clients increased by 13.2% to 12.2 trillion Roubles, the United Credit Bureau (OKB) reported, based on the analysis of loans of 82 million Russian citizens.

Estimates show that the number of new personal loans grew slower than their combined amount. Thus, over the past year, loans grew by 37% (or by 4.14 trillion Roubles) compared to 2016, while the number of loans only rose by 12% to 34.8 million.

Growth was observed in all segments of the lending market: mortgages, cash loans, car loans and credit cards. At the same time, banks issued most funds in the form of cash loans: almost 3 trillion Roubles, or 33% more than in 2016. The number of these loans grew by 14% to 24.7 million portfolios.

The total amount of mortgages increased by 42% over the year reaching 1.8 trillion Roubles, while the number of mortgages grew by more than 30% to 959,237 loans.

Car loans for 2017 by 36% over 2017 up to 333.3 billion Roubles. «Car loans returned to the pre-crisis levels, with the share cars bought in credit growing. In 2017, every other car in Russia was purchased with a recourse to car loans,» experts affirm.

World’s most free economies: Russia is 107th

The American Heritage Foundation published the results of an annual survey, revealing the world’s freest economy. According to the foundation, for the 24th year in a row, Hong Kong is leading the ranking with Russia situated at 107th position, right next to Belarus.

Cyprus ranked 48 ahead of many EU economies, such as Belgium (52), Spain (60), France (71) and Portugal (72).

Switzerland and USA head the list of tax havens

Concidering all the Crown dependencies, however, it is the United Kingdom that would take the first place.

The US stepped up a line in the ranking of tax havens, moving right next to Switzerland, according to the British NGO Tax Justice Network. The ranking offers country assessment on the amount of hidden capital and on the level of financial opacity. The United States ranked 6th in 2013 and 3d in 2015, when the assessment was last time published. The US share in the export of offshore financial services increased by 14% from 19.6% to 22.3% since 2015, according to the assessment’s authors (against a 4.5% market share for Switzerland).

«The United States remain a secrecy jurisdiction as they refuse to take part in international initiatives to share tax information with other countries. US have failed to end the practice of anonymous companies and trusts, aggressively marketed by some US states,» the authors of the ranking observe.

Without providing information to the tax authorities of other countries, the USA created its own system for collecting data on the assets of American citizens abroad — FATCA.

The third place in the ranking of tax havens, following Switzerland and the USA, is occupied by the Crown dependency, the Cayman Islands, followed by Hong Kong, Singapore, Luxembourg, Germany, Taiwan, the United Arab Emirates and Guernsey.

The UK is listed separately from its dependent territories (Jersey, Guernsey, Maine, BVI, Cayman Islands, Gibraltar, etc). Should all the dependencies be added together, Britain would take the first place.

Russia was ranked 29th, next to China and Turkey. The experts gave Russia the highest marks, in particular, for the transparency of business setup and for the current corporate ID system. At the same time, the level of bank secrecy is estimated as relatively high. Russia received average ranking on the international cooperation in taxation. Meanwhile, Russia’s share of the international offshore services market is insignificant.

The final ranking for the level of opacity, which takes into account a total of 20 parameters, was 64% in Russia against 76.5% in Switzerland and 60% in the United States. Ukraine ranked 69% and Latvia only 57%. As pointed out, Switzerland postponed the introduction of the automatic exchange of information for tax purposes. The most transparent country in the world is Slovenia with 42%.

The veil of secrecy contributes to the illegal fund transfers, money laundering, corruption and tax evasion. The progress made in recent years in the field of combating offshore and tax evasion is considered insufficient by the authors of the report.

The idea of creating a national database of legal entities and their beneficiaries has been discussed in the United States for many years, however, so long as the company registers are maintained at the state level, the registration of companies in the USA is not regulated at the federal level. Limited liability companies may be registered with law firms in Delaware, Wyoming and Nevada without disclosing any information about the owners.

The US tax service database only contains the names and identifiers of the companies that conduct regular business in the country. To corporate identification a DUNS number is assigned in the US by Dun & Bradstreet. The Financial Action Task Force on Money Laundering (FATF) indicated in a recent US report that one of the weaknesses of the country’s anti-money laundering system is the lack of information on the actual ultimate owners of companies.

Cyprus and Saudi Arabia sign a double taxation treaty

A double tax treaty was signed between Cyprus and Saudi Arabia on 3 January 2018. It is expected to come in force on 1 January 2019.

The treaty provides for a number of fiscal benefits for businesses of both countries. As expected, the treaty may significantly revitalize the investment climate in favour of Cypriot and Saudi economies.

Russian elites flight to Cyprus picked up pace by 4 times

Wealthy Russians get aggressive on buying real estate in Europe amid the stagnation of domestic economy and a new wave of relations with the West deteriorating.

Annual results reveal that the number of requests from Russians to buy European properties soared in 2017, according to the international real estate agencies.

The most popular investment destination is Cyprus with demand rising 4-fold. In 2017, the island’s authorities cancelled the property tax, and a year earlier, removed the lower threshold for investment in exchange of EU citizenship.

From now on, when buying real estate, foreigners have the right to obtain citizenship to their spouses, children under the age of 28 and parents. They are also free of taxes on dividends, interest on bank deposits and rental income. The Cypriot authorities also exempt buyers from taxes on the transfer of ownership when purchasing new, and reduced this type of taxation from 8% to 4% for the second-hand market.

«Russian customers mostly bought houses in Limassol with a budget of EUR 1 to 5 million in new developments near the sea. There was also a high demand for the office properties in Limassol,» the real estate agents comment.

The number of requests for the acquisition of properties in Switzerland tripled over the last year. Russians showed interest both in residential estate for relocation and in commercial properties. Most often these are offices with tenants, of which there are very few on the market, experts say.

In housing market, demand doubled in Germany, France, Italy and Malta. In Berlin, for instance, Russians preferred investing in new apartments buying 3 to 5 properties with a total budget of EUR 1–2 million. In France, popular properties are found in sea-side Cannes, while in Italy — near the lakes of Como and Garda.

The demand also grew for housing in London: on average, Russians are prepared to spend from 2 to 10 million pounds on properties either for primary personal residence or for temporary location to educate their children.

Wealthy Russians paid particular attention to the structure of transactions and the optimisation of taxation (covering issues of the automatic exchange of information, declaring foreign accounts and the controlled foreign companies). They took an early interest in how to conduct the acquisition so that it does not entail a tax trail in Russia.

EU will consider import duties for goods from the United States

The European authorities headed by the EC President Jean-Claude Juncker debated the retaliatory measures that the EU may introduce should the US President Trump go ahead with his plan of duties on imported steel and aluminium. The EC also considers the possibility of filing a complaint with the WTO against the United States and introducing protective measures against a massive influx of the American steel products from other countries onto the European market.

The European Union, it was announced, might impose import duties on the US goods worth EUR 2.8 billion (USD 3.5 billion). The EU plans similar duties on a number of consumer and agriculture products, as it follows from the list published by the EC. It also includes the US steel imports.

The counter-measures by the European Union might include taxing a wide range of products imported from the US including T-shirts, jeans, cosmetics and other consumer goods, motorcycles and pleasure boats of combined worth about EUR 1 billion; orange juice, bourbon whisky, corn and other agricultural products worth EUR 951 million, along with steel and other industrial products for EUR 854 million.

In March, the EC discussed these measures in Brussels with the representatives of EU governments. The day before, the US President Donald Trump announced that he was going to impose higher import duties on steel and aluminium in order to protect the American producers. The White House later admitted that the administration is still to resolve a number of issues.

Trump believes that higher duties will protect jobs in the USA. However, higher prices for the consumers of steel and aluminium (such as the automotive industry and O&G sector), on the contrary, will lead to a higher reduction of jobs than those created as a result of the new duties, experts warn.

Besides, there are serious concerns over the possible response of the steel exporters, which may ultimately hit the exports of the US agriculture products to the same markets.

Bitkoin now out of fashion

Why did Russians stop looking for cyber currencies online?

Google and Yandex search engines reported a decrease in requests sent by users to look for bitcoin: according to Google Trends, the rate of requests mentioning this cyber-currency fell since December by more than 80%, with Yandex reporting a drop in absolute terms over a 30-day period from 8.5 million to 4.3 million.

At the same time, the trend of growth in the number of search requests follows closely the evolution of bitcoin’s price: on December 17, for instance, as the price of bitcoin broke a record USD 20,000, both Google and Yandex reported a record number of requests. Thereon, the popularity of bitcoin in searches started falling.

Early in February, the bitcoin set an anti-record, when the price of the most popular cyber-currency fell under USD 6,000. As of March, the price of bitcoin evened out at around USD 10,000 — 11,000.

Decline of interest in bitcoin, however, does not directly correlate with the economic potential of cyber-currencies, analysts affirm. They also claim that the cyber-currencies that have not, so far, become economically viable will certainly maintain this role for a long time. So far, this asset remains speculative, and the fall of interest is due to the current dynamics of this cyber-currency: so long as the growth trend prevailed with the bitcoin hitting new highs, it caused public interest as an opportunity to earn, or at least, to learn on other success stories. However, following its decline, the interest faded away significantly.«

Rating agencies believe that cyber-currencies have a strong economic potential ahead of them: «What we observe today is a test-drive of this new technology before the society accepts it. Just before the New Year, the bubble effect phenomenon followed many people learning about the bitcoin at the same time: as they saw the currency grow, they rushed to buy in, creating a debate bubble around it.»

Looking at the current trends, 2018 is likely to become a year of «absorbing the cyber-currencies within the legal framework on the key markets,» experts believe. Market analysts agree: «Cyber-currencies certainly have a future, while more and more countries gradually recognise bitcoin as a means of payment. Today, the phenomenon is entering the everyday life.»

According to the annual trending review by Google, «Year in Search», bitcoin became one of the most popular search requests in Russia in 2017. The top ranked searches also include blockchain, hype and spinner.

The EC to debate the use of tax evasion schemes in 7 EU states

The European Commission intends to draw attention to the use of «aggressive tax optimisation» policies in seven EU countries: Belgium, Hungary, Ireland, Cyprus, Luxembourg, Malta and the Netherlands. European media quote the EC Commissioner for Economic and Financial Affairs Pierre Moscovici.

According to Moscovici, these EU states «jeopardize the principle of fairness» of the EU’s domestic market, allowing companies to have an «aggressive tax planning», which violates the principle of fairness in competition and increases the tax burden of other European taxpayers. According to the European Commission, evasion of the fair taxation damages the budgets of the EU states in the amount from EUR 50 to 70 billion a year.

The EC have not clarified the choice for the 7 countries on the list, while leaving out Andorra, Monaco and others.