Ritchie manages to note that lots of Russian money went to Cyprus then went back into Russia as FDI.
Gosh, well done that man. Everyone else knew about this from some time in 1991.
Every single one of those locations is a tax haven, which shows how distorted the world’s investment markets are by tax. But there at the top of the list is Cyprus. And almost certainly most of that was really Russian money in the first place.
When data is this obscured by tax haven abuse, and when tax havens so distort the allocation of resources in the world then the case for reform is overwhelming.
The question is – will David Cameron deliver at the G8? Don’t hold your breath.
But as ever he manages to entirely miss why this was being done.
Recall that Russia has a flat tax of 13% on all incomes. So it\’s not actually tax dodging that this is about. It\’s about legal certainty. Russian property that is owned by a Russian in Russia isn\’t in fact secure property. Mr. Khordokhovsky being a case in point, Sergei Magnitinsky being another. Piss off the wrong politician and you\’ll lose it all to the Courageous State that is Putinism.
However, if you take the money out of Russia, wash it through Cyprus, then it\’s foreign money innit? And that has much greater (although most certainly not perfect) legal protections.
Cyprus and Russia just isn\’t about tax. It\’s about legal certainty over property ownership. All that rule of law shit.
It\’s all for much the same reasons that no one sane invests money in Russia subject to local arbitration: everyone uses London (or Stockholm) instead. Because you cannot trust the local legal system. Nor would anyone sane invest real money in Russian law bonds……just as those who invested in London law Greek bonds got their money back, those who invested in Greek law Greek bonds took a 90% haircut.
It\’s all about the rule of law, being free of the Courageous State, sod all to do with tax matey.