Belarusians move assets from Cyprian banks to Latvia
Latvia will introduce Euro in 2014. It seems counterintuitive that the country of two million people would want to enter the perpetually distressed and recession-stricken economic zone. But for Latvia it has a variety of benefits, argues Andrew Bowen in The National Interest. But there is one worrisome aspect.
Andrew Bowen: "The country will be used as an entry point for illicit Russian money seeking to enter the EU."
Along with the introduction of Euro, Latvia will reform its tax laws. In view of German newspaper Der Spiegel they will make Latvia a new taxation paradise and will allow it to compete with Cyprus and Malta. Some pundits reckon 10 per cent of capital could move from Cyprus to Latvia within three years. And not only Russians have already begun moving their assets, says Tatsiana Lutsinska from Prime Consulting:
"We receive hundreds of requests from Russia, Belarus, Kazakhstan and Ukraine. Many peole are willing to move their money from Cyprus to Latvia. Now we look better than Cyprus."
Latvian banks are particularly attractive for residents of former Soviet republics who wish to have their many legalized in Europe in the light of tighter controls over obscure schemes in Switzerland and Luxembourg. Perhaps, this is why Markus Meinzer, a senior analyst for Tax Justice Network brands Latvia as "Luxembourg for the poor."
Interestingly, one cannot talk about huge Belarusian money in Cyprian or Latvian banks, reckons Belarusian commentator Leanid Zaika.
Leanid Zaika: "Frankly speaking, we can't even put the equals sign here. While Ukrainians used to hide and launer their money in Cyprus, Belarusians are tightly scrutinized by the financial police. All Belarusian transfers and deposits are small."
Back to Latvia, a huge share of deposits in local banks are owned by foreigners (4 per cent in 2012), and this concerns European officials. The European Central Bank and European Commission have put the fight with financial crimes into the spotlight of their policy. In theory. In practice, the situation looks different, says Sven Giegold from the Greens faction in the European Parliment.
Sven Giegold: "Instead of abolishing the existing taxation heavens, we have added another one in Euro zone."
It is note worthy that Latvia currently has a low corporate tax rate at 15 per cent, while the average rate in EU stands around 23.5 per cent. Only Ireland and Cyprus have the lower corporate tax rates at 12.5 per cent. But Der Spiegel writes the banking systems in these countries have collapsed, with their governments being forced to seek bailout from the European Union.