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locals blocking roads, he said. “Was it too hard to schedule installation of gas lines in a few villages?” he asked, adding that Socar “has the duty to spend the money from oil income for the people’s welfare.”
Nurullayev also criticized AZAL for inflated ticket prices. Addressing AZAL’s president, Nurullayev said, “You have built a business using the state budget and managing the state companies as your own firm. This is disgraceful. State companies are standing in a line to loot the government’s budget. You must make money and pay back your loans. On top of that, you must pay taxes.”
Gubad Ibadoglu, an Azerbaijani economist at Rutgers University, linked Aliyev’s criticism of state-owned companies to the economic downturn: The president “is concerned that these companies might go bankrupt and their debt will have to be covered by the state budget,” Ibadoglu said in an interview with exiled media outlet Azad Soz.
Russia to raise tax on dividends transferred abroad, amend its double taxation treaties
BMB Russia
Looking to shore up federal funds during the pandemic, the Russian government is making good on its promise to raise taxes on dividends transferred abroad.
Wealthy Russians have long abused a loophole, whereby they register businesses in low-tax offshore locations such as Cyprus and the British Virgin Islands, and distribute profit via dividends to the “foreign” firms. In doing so, they avoid Russian income taxes.
Putin claims that most firms pay an average of just 2% tax on these offshore transfers. Looking to stem such capital outflows during the coronavirus (COVID-19) pandemic, Putin promised in March to hike taxes on all dividend and interest payments leaving Russia to 15% in January 2021.
In order to do this, Russia must amend a series of tax agreements with low-tax countries that are popular homes for Russian firms. These agreements are intended to avoid double taxation of income flowing from Russia to the offshore destinations.
Ibadoglu added that Socar is far less efficient than a corporation and that if no serious structural changes occur within the company, it will be bankrupt by 2023. “It’s not difficult to predict that Socar will go bankrupt. One can come to such
a conclusion by analysing Socar’s obligations and its short- term and long-term debts. I think timely measures should have been taken to prevent Socar [and] AZAL’s bankruptcy.”
Baku-based activist Anar Mammadli said that the president’s concerns about the budget and privatisation are years too late. “Publicly acknowledging the problems that are known to everyone, including himself, is not the way out. We need reforms, not a confession,” Mammadli wrote on Facebook.
“Where was the country’s president looking all these years? Why did he keep those people in power,” activist Bakhtiyar Hajiyev asked on Facebook of the state-run companies’ management.
This story originally appeared on Eurasianet.
In its hunt for a little more revenue during the crisis the Kremlin will hike taxes on dividend payments abroad to 15%.
(MinFin) began negotiations with Cyprus. Yet on August
3, MinFin revealed that the two parties had not come to an agreement, and instead the Russian government was ready unilaterally to withdraw from the bilateral treaty.
In addition to Cyprus, MinFin has requested that Malta, Luxembourg and now the Netherlands (where Yandex and the X5 retail chain are based) revise their treaties. Experts note that Austria, Switzerland and Singapore could be next.
What does this mean? Firms registered in these countries are in a tough spot regardless of the outcome. If the treaties are terminated, they face the risk of paying full taxes in both Russia and their offshore location. If the treaties are amended, then most firms will see their tax rate increase from about 5% to 15%, which is not attractive either.
The Kremlin has long prioritised “de-offshorisation”, with the government creating tax-preferred “onshore offshores” and offering several rounds of capital repatriation amnesty. COVID-19 has provided the pretext to take the next step and push companies to return home.
Immediately after Putin’s speech, the Finance Ministry
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