OREANDA-NEWS. July 10, 2013. Latvia is one of the countries which will be preferred in the foreseeable future by legal international capitals – this has been declared at the expert financial forum in Moscow “Offshores: New Rules of the Game in Russia and the World”.

Latvia was represented at this forum by the Head of the Legal Department of Rietumu Bank, Jaroslav Zamullo.

The expert financial forum was organised by one of the largest Russian consulting groups Gradient Alpha, with the support of the Expert Tax Council of the Chamber of Commerce and Industry of the Russian Federation. The key issues of the forum were the latest tendencies of using offshores in Russia and the world, as well as the corresponding changes in business practices.

As was emphasised at the meeting, offshores are used by most of the leading companies in all the countries of the world – thus, only two out of 100 members of the FTSE 100 Index have no offshore subsidiaries. During the period from 1990 to 2010, over USD 800 billion covered the ‘offshore routes’ from Russia alone (in comparison – the country’s GDP in 2012 was USD 2 trillion). Still, there are data that around 30-40% of these funds were later reinvested back into Russia.

As Chairman of the Board of Gradient Alpha, Pavel Gagarin noted, there is currently an obvious general tendency in the world towards “deoffshorisation”, which has affected Russia as well and can be explained by the natural striving of authorities to return funds back to the country. Major prerequisites for “deoffshorisation” are technological development and simpler information exchange opportunities that facilitate access to data, the crisis of the developed countries which try to struggle with the budget deficit in this way, as well as pressure on the governments of these countries on the part of the public. Such business giants as Google, Apple, Microsoft, Amazon, Hewlett-Packard and others, which have underpaid billions of dollars to the budget due to using tax havens, are now being scrutinised by the public.

However, as experts acknowledge, in reality “deoffshorisation” will not mean businesses stop using low tax jurisdictions but rather reorientate themselves to those jurisdictions that have a good reputation, including in the eyes of the taxman. The experts noted that further on, legal capitals will gradually overflow to countries with a soft tax climate and a developed financial infrastructure, such as the Netherlands, Ireland and Latvia.

‘Tax havens are one of the key constituents of the modern global financial system. The OECD is not against tax havens in principle but does strive for greater transparency,’ said the head of Gradient Alpha.

In turn, the Rietumu Bank spokesperson Jaroslav Zamullo gave practical recommendations for selecting foreign banks and jurisdictions for conducting business, ‘One should carefully choose not only a country but a specific bank. Financial institutions must be diversified – to have a bank for payments, keeping assets, lending, etc. One should understand that the requirements of a bank for opening accounts are an indication of its status. And one should definitely consider the bank’s loyalty to the client, the language and processability.’ The Rietumu spokesperson also noted that there is a provision about criminal responsibility for the disclosure of banking secrecy, both in Latvia and the EU, which is retained even in view of the recent world tendencies of increasing the transparency of the financial sector.

It was emphasised at the meeting that in contrast to western companies, which forward their profits to offshores, one of the chief reasons for Russian businesses using offshores is to secure the secrecy of the holding business. This is why Russians, in contrast to their western colleagues, register at offshore zone parent companies that hold real Russian enterprises.

‘This year, an especially favourable regime for registering international holdings took effect in Latvia that allows the issues of secrecy and taxation to be solved. Our Russian clients have already started using these new opportunities. The trend is gaining momentum and I am certain that in the future the number of those who would like to conduct business from this comfortable and commendable European country will increase. Latvia, with its developed financial system, liberal laws and qualitative service provided in different languages, including Russian, has every chance of becoming a respectable new type of offshore for legal capitals,’ said Jaroslav Zamullo