Russia To Draft Capital Amnesty Bill

by Tatiana Smolenskaya, Tax-News.com, Moscow

28 April 2005

Following Russian President Vladimir Putin's plea to the tax authorities to cease "terrorizing" businesses, Finance Minister Alexei Kudrin revealed that the government will soon extend an olive brach to investors with the drafting of a capital amnesty bill.

Capital flight from Russia has increased at an alarming rate in the past year in the wake of the Yukos affair and several other multi-billion dollar claims for back taxes from domestic and foreign firms. Kudrin has called for action "in months, if not days" to restore investor confidence.

Kudrin predicted that capital flight would be reduced to US$4.8 billion this year from US$7.9 billion. Furthermore, he foresaw that some US$1.5 billion would be repatriated to Russia from offshore and other sources.

In his state of the nation address to parliament earlier this week, Putin called on the tax service to cease interfering in the past tax affairs of businesses, and suggested that the statute of limitations allowing past privatizations to be challenged should be reduced to three years.

Putin also recommended an amnesty on the repatriation of offshore funds, on the proviso that Russia's 13% income tax rate is paid on all undeclared funds, and that the assets are paid into Russian bank accounts.

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