Russian tax authorities make use of Panama papers
Russian Federal Tax Service has included information from offshore-exposing Panama papers in its monitoring systems.
The tax service started using so-called Panama papers when checking almost all of export operations, Life reported. For example, tax inspectors see if the transactions are ‘clean’ and identify beneficiaries of offshore companies that did not report this to the tax service.
We should remind that the Panama papers are leaked documents journalists obtained from Panamanian law firm Mossack Fonseca. The company is a leader in the offshore registration market. The documents were received by German newspaper Süddeutsche Zeitung in 2015 from an anonymous source.
According to a Life’s anonymous source, Russian tax officials have to use the information as long as there is no automatic exchange of tax information between countries. As Angel Gurría, Secretary-General of the OECD, stated, Russia would join the system in 2018.
In 2016, the country signed the Berlin agreement between 81 countries, including the Republic of Panama. Under the document, the countries are obliged to provide full information on any company the Federal Tax Service finds of interest. However, the automatic exchange is working only with Cyprus so far, which led to a certain outflow of Russian businessmen to other offshore jurisdictions.
There are about 11.5 thousand offshore companies in the database that the department could find interesting. For example, there is Zakhar Smushkin, Ilim Group’s Chairman of the Board. Companies in the names of Boris and Mikhail Zingarevich from Ilim Group’s Board of directors are registered on the British Virgin Islands.
The Panama papers feature Andrey Rogachev, the founder of Pyaterochka and Karusel retail chains, as well as of LEK construction group, presently running Verny retail chain. According to the database, his company is affiliated with four offshores located in the British Virgin Islands.
The archive also reveals that Fort Group co-owner Boris Paikin runs Sander Universal Inc., an offshore registered in the British Virgin Islands.
Other people that turned out to have offshore companies include Bankirsky Dom Sankt Peterburg’s Board Chairman David Traktovenko, Tinkoff Bank Board Chairman Oleg Tinkov, Adamant Group Vice-President Aleksey Gnesin and many others.
According to a spokesman with the Federal Tax Service of Russia, the tax authorities use all the available information that can be obtained within the law.
Meanwhile, companies are trying to judicially contest the use of Panama papers: two cases have already been considered in arbitration, however the courts supported the tax service.
Yet, there has been a certain accomplishment when tax specialists used the compromising materials to prove the transactions of Maslororginvest LLC with its affiliated companies were fictitious and brought a 4.3-million-ruble damage to the budget. Another complex scheme of raw materials purchase was revealed: Milagro Foods was employing it through a chain of intermediaries so that the cost of raw materials was increasing while taxes were decreasing. Now the company will have to pay additional 16 million rubles.
The files turned out to be particularly useful given the altered taxation law for owners of controlled foreign companies effective as of the beginning of the year. Now, offshore beneficiaries are required to pay to the Russian budget a tax on the retained earnings of a controlled foreign company at a rate of 20%. Companies were required to disclose their offshores last year too, yet only about 7,000 Russian residents sent their declarations on controlled companies to the Federal Tax Service.
Besides, if an offshore company acts as part of a "transit" capital flow scheme, it will not be eligible for preferential rates of taxes under the intergovernmental agreement on double taxation avoidance.
Previously, the Russian government backlashed the Panama papers after presidential press secretary Dmitry Peskov said the documents had been stolen. He stressed that there was nothing illegal in the offshore, and non-payment of taxes was the only thing that was illegal about the whole matter.
Although Vladimir Putin acknowledged Panama papers as reliable, he emphasized that it had definitely been done by someone's order. "There is a feeling that it was not even journalists who made the papers, but lawyers more likely... I can see ringleaders’ ears sticking out everywhere and they aren’t even blushing," the president said reminding that Suddeutcshe Zeitung was a part of a media holding, which in its turn belonged to Goldman Sachs, an American financial corporation. “The closer we get to the elections, the more of bogus stories like this we are going to see," Putin summed up.
Since early February, there has been a preventive operation of the National Police of Ukraine in cooperation with the border and migration services called ‘Migrant’. Its aim is to identify and expel thieves in law and foreign crime lords out of the country.