Russia freezes out Cypriot tax paradise; the growing centi-billionaire club
Hello, and welcome to Oligarchy. We are tracking how Covid-19 and the world’s response to it is affecting the super-rich — and what that means for power and politics.
RUSSIAN CAPITAL
Bad news for Russian oligarchs. Back in March, President Vladimir Putin declared that he was fed up with how much money was pouring out of the country into tax havens. He said it was unfair that ordinary Russians had to pay tax at 13%, while the wealthy owners of corporations paid a fraction of that when exporting their wealth offshore.
At the time, I assumed this would go the way of his various other “de-offshorization” initiatives, which never amount to much, but — surprisingly enough — the budget crunch caused by Covid-19 and the oil price slump, on top of the budget crunch that was already happening, seem to have focused minds in Russia’s finance ministry.
Last week, the ministry announced Russia would unilaterally scrap its treaty with Cyprus, since the Mediterranean tax haven was refusing to agree to any alteration. The old deal allowed financial flows to move between the two countries at just two percent tax, to the great advantage of lawyers in Cyprus and the oligarchs that employ them, and the great disadvantage of the Russian budget.