Is it possible to eradicate offshores?

Author : Oleksandr Okhrymenko

Source : 112 Ukraine

Ukrainian officials use tax dodging and offshore practices simultaneously
13:37, 8 November 2017

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An offshore issue is often topical in our circles. People become angry when they find out that oligarch or politician has an offshore account. At the same time, few people understand what an offshore is.

The status of an offshore account is not prohibited in the world. Many well-known corporations, ranging from "Google" to "McDonald's," are offshore. This is a normal international practice.

Related: Details of Paradise Papers: What we learned from new offshore compromising data?

Related: Paradise Papers: Ukraine’s gas top manager owned offshore company, which existed for 14 months

As a rule, large companies work throughout the world, and therefore they often have difficulties with the differences in tax laws in different countries. As a result of such differences, there is confusion, which leads to the fact that it is necessary to overpay taxes or pay twice for the same commodity. VAT refund system is so confusing in different countries that it is not always possible to get VAT, you just always have to pay. In order to make it easier for large international companies to work, offshore zones and accounts, created on the world market. Everything is simple here. An offshore company is free from complex accounting and tax calculations. It can freely and quickly work with a large number of different countries around the world, without thinking about tax problems. As a result, the amount of income accumulates on an offshore account. As a rule, once a year, the owner of an offshore account transfers money from offshore to the country of his registration and pays taxes. As a result, there are no claims to the person who has an offshore account.

Related: Another offshore scandal: ICIJ releases The Paradise Papers

Often, offshore account holders simply forget to transfer income to the country of registration and do not pay taxes. It is called fiscal avoidance of tax dodging. That is what our most active deputies or ministers are doing so often, at the same time telling us about reforms and the fact that Ukraine will soon enter the EU. They themselves do not want to pay taxes, like in the EU, they prefer to simply hide their money in offshore.

There is another Ukrainian tradition. Most often, the most active fighters with corruption are the main corruptors. It is not a secret that now the schemes within guest tenders are very complicated. Nobody brings money in cases or bags. Everything is done in a very civilized way. A person, who wants to accidentally win a tender, transfers money from his offshore to an offshore of the state official, most often under the guise of financial aid or trash securities, and the guest tender goes “the right way”. That is precisely a crime. But we should not rebuke offshore accounts because they are bad. They have nothing to do with it. These are our fighters with corruption and our verifiers, who see that the guest tender was executed with gross violations, and suddenly strongly deny everything, when they find out that their amount of money from the interested person was transferred to their offshore account.

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Now there is a tendency in the world to reveal information about offshore accounts. From January 1, 2018, all residents of the EU will be required to indicate all their offshore accounts in all parts of the world. Concealing this information will be considered a violation of the EU tax law. At the same time, all European, and American banks will be obliged to check all payments that enter the EU countries from offshore zones, check them on "the purity of the transaction." If there are even the slightest doubts that the deal has signs of illegality, then the bank will be obliged to block the money received until its legality is clarified. With particular rigor, banks will be required to verify non-residents who have opened accounts in the EU, but receive payments from offshore zones. For our Ukrainian ministers and reformers this news is like a bolt from the blue. It makes it possible to monitor persons who use offshore accounts and make them pay taxes. But is there a desire from our fiscal or auditors to really use the EU's assistance to find ministers and deputies who do not want to pay taxes?

Related: Lyashko’s Radical Party blocks Ukrainian parliament rostrum, demands probe into Poroshenko’s offshore dealings

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