Russian Government Mulls Amnesty On Illegal Offshore Savings

by Tatiana Smolensky, Tax-News.com, Moscow

21 June 2002

According to recent reports, the Russian government is considering the possibility of an amnesty on funds illegally transferred offshore in order to boost investment and government revenues.

The AFP reported that the new legislation would legalize the capital currently held by Russians in offshore accounts, providing a one-off payment of 13% income tax on those holdings is paid. However, a government spokesman refused to comment on the speculation surrounding this issue, according to the news agency.

A similar initiative was completed recently in Italy, and although Finance Minister Giulio Tremonti hailed the amnesty as a triumph, even at the substantially lower tax rate of 2.5% on repatriated holdings, the initiative did not provoke the avalanche of returning funds which the Italian government had initially anticipated.

However, AFP reported that the subject was broached by President Vladimir Putin in Moscow on Wednesday, lending suggestions that an amnesty is in the pipeline a great deal more credibility.

Speaking to the Russian Chamber of Industry and Commerce regarding an anticipated crack down by Western nations on assets contained in undeclared accounts, President Putin observed that:

'I am not telling you that these accounts will be frozen tomorrow, but if decisions like that are made, forgive the simplicity of my language, but you will choke with dust while running the corridors of courts trying to unblock these accounts.'

He continued: 'It will be much more sensible for the business community together with the government to think about creating favourable conditions for investing Russian resources, including those placed in the West, in the Russian economy.'

President Putin also reportedly urged the cabinet to be lenient with Russian citizens repatriating assets, and not to trace the source of the funds in the offshore accounts.

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