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Over the past year, the National Bank of Ukraine has issued 400 licenses for investing abroad to individuals under a simplified procedure that requires the applicant to submit all necessary documents to the servicing bank (primarily with respect to the investment object abroad), send information electronically from the servicing bank to the NBU and directly receive an electronic license. The whole procedure can take several working days. After receiving the electronic license, an individual can make investments abroad up to $ 50,000 (or the equivalent of that amount in another foreign currency). From the moment of issuing the license, you can conduct all the necessary financial transactions, open accounts abroad in foreign banks, place deposits in them, buy real estate, securities and other financial instruments on the international stock market, become a shareholder in foreign companies and trusts.
According to the information published by the regulator, the total amount of funds withdrawn abroad on the basis of individual licenses was $ 9 million.
In this entire positive situation, there is one keyword - "individual". As you know, only banks - government and commercial - can conduct a wide range of currency transactions in our country without agreeing on each action with the NBU. They operate on the basis of a general banking license, among which there are, for example, carrying out operations with currency valuables in international markets.
All other subjects of the currency market (both legal entities and individuals) can conduct only single operations, individually coordinating them in the government offices. You want to buy a company abroad - coordinate, to attract a non-resident loan – and then register it. And so on, according to the list of currency desires. In addition, the National Bank has a habit of permanent suspension of the issuance of individual licenses during the period of aggravation of the situation in the foreign exchange market. And it becomes acute very, very often.
As a result, the window for investing abroad works for a legal participant in the capital market, as the entrance to the meat grinder: lucky – you’ll be alive, unlucky – you’ll be minced meat. Some will try to argue: they say, there are countries - donors of capital, and there are recipients. If the country has a surplus of financial resources, as, for example, the Gulf countries, then it is necessary to carry out effective investments in foreign projects. And if there is a shortage of investments in the country, then, in this case, it is advisable to limit the outflow of capital.
But such dialectic of financial flows is understandable only at first glance. In fact, all successful countries that made a qualitative leap from the reservation of Third World countries to the "golden billion", carried out the most profound liberalization of the system of currency regulation and control (for example, Poland - according to the "plan of Balcerowicz"). The logic here is quite simple. Any country for an external investor is like an unfamiliar tunnel. And he will only want to enter if a green light is on at the entrance and the exit. Nobody will go when the red light is on and, moreover, no one will drive into the tunnel with green light, but no exit. Stay in a dark impasse and wait for the green to turn on ... It is unlikely that any of the foreign investors will choose such an extreme, it is the prerogative of local "dungeon dwellers".
Therefore, in each economic system, there should be both clear entry and exit mechanisms. Without this, any model is doomed to self-destruction and exhaustion of internal potential.
In Ukraine, the decree on currency regulation, adopted at the dawn of the 1990s by the Cabinet of Ministers, still operates. Last year the volume of dividends withdrawn from Ukraine by the end of 2017 amounted to $ 1.8 billion, and the size of foreign direct investment in equity - $ 1.2 billion. What does this figure say? The fact that the amount of distributed profit on investments that is owed to foreign shareholders actually exceeds the growth of these very investments. This is not just about investing in new business projects, but also about reinvestment of earned profits.
In order to radically change the situation, the state should make absolutely unnatural step: in the face of pressure on the currency course to abandon the imposed restrictions and unblock the main channels of investment. It's like a driver in the U-turn must press the gas pedal, and not the brakes, although the latter looks more justified.
Naturally, at first, this decision can cause tactical turbulence in the domestic foreign exchange market. But strategically, the national capital market will only benefit from this breakthrough of the "blockade".
Moreover, the world already has mechanisms for replacing currency control - tax.
The year before the 70th Congress of the International Tax Association in Madrid ended, it summed up the implementation of the BEPS-15 rules on combating tax evasion (a plan to counteract the erosion of the tax base and the withdrawal of profits from taxation, or BEPS-Base Erosion and Profit Shifting). These measures are implemented in the EU and countries of the Organization for Economic Cooperation and Development (OECD). In the US there is also a system of tax reporting on foreign accounts (FATCA), which controls income of the American citizens in other states. The essence of these systems is simple enough: pay taxes and drive your money around the world without any problems and currency control. In other words: it is not necessary to complicate the life of investors and businesses, which pay taxes and at the same time faces, for example, a problem of repatriation of dividends and early repayment of non-resident loans. On the BEPS implementation map, Ukraine is still on the list of 26 "orange" countries, which do not properly apply these norms.
In order to simplify currency regulation as much as possible, Ukraine will have to adapt the BEPS activities. This is recognized in the NBU, pointing to the fact that deregulation of the currency market will be possible only if we:
- establish transparent taxation mechanisms for CFC (controlled foreign companies);
- deciphering the financial statements of our financial groups in all countries where they conduct their operations;
- establishing rules for limiting financial transactions with related parties;
- revise international treaties in order to avoid double taxation, etc.
An impressive list, implementation of which will cause big personal dislikes between their creators and our oligarchs.
Ukraine would be more courageous if it followed this path. In particular, it would be possible to introduce such a notion as the "confirmed amount of capital". In simple words: if a resident of a country (an individual or a legal entity) has paid all of the established taxes and has a certain hryvnia cash balance, he has the right to dispose it in the way he/she wants. In a transition period 3-5 years, it is possible to establish a gradually decreasing additional fee for the repatriation of income abroad in the amount of 5-10-15%. We would get a kind of analog of the Ukrainian BEPS. In addition, one could go to the maximum simplification of the operations of non-residents from the EU and the US regarding currency accounts in Ukraine.
In the big business, tax evasion takes place with the help of controlled foreign companies and violations of transfer pricing rules. For example, the owner of the Ukrainian ore mining and processing enterprise registered his company in Austria and sold it ore mined in Ukraine, but at price $ 20 less on a tonne than price is on the world markets, and then sold the goods to real buyers, but from an Austrian company and market price. Thus, in the accounts of the company, there remains up to 30% of export earnings per year. Proceeding from the norms of the current legislation, an honest taxpayer should, by the end of the year, conduct an analysis of his supervised operations and add tax differences based on the so-called conventional prices determined by the "arm length" method (when transactions between related persons are evaluated by comparing them with similar transactions with unrelated companies). This is what an honest taxpayer should do, but what will Ukrainian tax payer do? He will register an Austrian company on a Viennese homeless person and will not pay anything.
At the moment both the government and all of our financial groups are under pressure from the West regarding the introduction of the mentioned above measures. The longer they resist, trying to earn, the less chance Ukraine will have to enter the international investment club. Fortunately for us, the authorities will no longer be able to realize the notorious turn to the east: the Russian Federation has already become a party to the BEPS plan ...