Russians and Cyprus really isn\’t about tax

A longer version of earlier musings at Forbes.

It is this that explains much of the round tripping in and out of Cyprus to and from Russia. Not taxes at all: but the desire for a stable legal system with honest courts and where property rights mean more than being in political favour. And I’d be prepared to make the case that similar things matter in Mauritius and elsewhere.

It was PJ O’Rourke who said that you should never let the government be the people with all the money and all the guns. Which goes a long way to describing why people like these offshore jurisdictions. It’s not that they are outside the tax jurisdiction so much as that they are inside a different legal jurisdiction.

In short, it’s a lot more difficult for the mafia or the government, to the extent that these are different organisations, to steal stuff if it’s legally in somewhere where they don’t control the legal system.

3 thoughts on “Russians and Cyprus really isn\’t about tax”

  1. Seems it didn’t work.
    They “forgot” to close the Moscow branch.
    So the hot money has already left, the normal business money will be scalped even closer to the bone.

    Never mind, they’ve set up de facto protectionism in Cyprus. Maybe this was the plan all along.

  2. I’m flattered that you have used a comment of mine about changing law to make a Forbes post.

    But I’m not sure you have thought things through. Yes, sovereigns can change the law to the detriment of outside investors. But if sovereigns can’t, then people such as Elliot funds can game against those who do buy into a sovereign restructuring. Look at the current position – Argentina is able and (yes) willing to pay bond holders, but prevented from doing so by hold outs using US law. OK, not entirely prevented, but given a real incentive not to (and/or to screw those who bought into the restructuring ).

  3. Not to mention all the Russian assets in Cyprus after being contributed to a Cyprus SPV as security for loans. A few years back I guess every major construction project in Moscow was owned by a Cyprus company, although BVI seems to have been gaining ground recently.

Leave a Reply

Your email address will not be published. Required fields are marked *