NEWSLETTERS

August: hot summer does not slow down business avctivity.

August, 2010

Summer 2010 happened to be hot not only in Cyprus & other Mediterranean countries but in Central Europe as well. Thus North Germany region face temperature records, along with Finland, Russia, Ukraine & some other European countries. However, hot weather didn’t slow down business activity. For instance experts of Cyprus Registration Chamber noted a certain growth of international companies’ business activity. Probably in Cyprus in particular it can be related to the fact that many businessmen came to the country not only to make business, but also to relax on the most ecologically clean beaches, more than 150 of which were granted World Health Organization mark.  Continuous business activity in spite of weather conditions has been observed in August in Paris, Berlin, Vena & especially in Brussels, where more than 40 thousands international officers & businessmen work.

Lithuanian Prime Minister: GDP grew 6,6%, we are on the right way

Mr. Andrus Kubilus, Lithuanian Prime Minister commented on 28 of July new data provided by the Lithuanian Department of Statistics concerning the economy’s growth in the country. He believes the new data shows that the authorities had chosen right strategy to fight the crisis. According to the Department of Statistics of Lithuania Lithuanian GDP grew 1,1%  in the second quarter of this year compared to the same period in 2009. If we compare figures of 2010 then the GDP growth in the second quarter of the year constituted 6,6% compared to the first quarter. “I am happy about the economy revival. It proves that we are moving in right direction, Lithuanian economy gets out of the crisis & the plan for economy stimulation works out. Still we require additional efforts & time in order to stand against the challenges of unemployment & budget deficiency”, — Lithuanian Prime Minister told.

Let’s remind that in the framework of anti crisis measures in Lithuania salaries of budget paid employees, social benefits & pensions were cut several times during the last two years.

Luxury is not for budget

“Introducing in Russia excises for luxury goods will scarcely increase budget profit,” — Ilya Trunin, Director of Taxes & Customs Tariffs Policy Department of the RF Ministry of Finance believes.  “We will waste more only on the administration”, — they think in the Ministry of Finance, however they doesn’t refuse to consider the initiative of their colleagues. Mr. Trunin reminded that in the 90-ies they excised carpets, cut-glass wear & jewelry. “The excises depended on the price. It is difficult now to predict how such mechanisms could work today”,—he said. According to Mr. Trunin the theory of taxation says that excises should be levied on the goods the demand on which is “low - elastic”, i.e.  not depending on the price their consumption level remains stable. Examples of such products are oil products & tobacco. “I can’t see no other goods of the kind at the moment”, — the head of the department told. The head of the Ministry for Economic Development Mrs. Elvira Nabiulina already revealed the Ministry’s plans to make a list of luxury goods liable for excises earlier this month. She reminded that in many countries excises are used for much more types of goods than in Russia. “They are products that are not included in the list of every day demand. This list can be very large in different countries. We excise only oil, oil products, alcohol & tobacco,”— she pointed. According to some mass media the Ministry for Economic Development thinks about excising jewelry, energy ineffective goods & even chocolate. One of the variants consists in partial restoration of the excises products list named in the excise law that expired in 2001. The issue of excising luxury goods has been put on discussion for many times. Last time the State Duma declined this law project this May. The parliamentary majority did not support the amendments to the Tax code of RF that suggested to acknowledge as luxury goods with differential 1%-5% rate such goods as elite living real estate, country houses & lots that cost more than 15 million rubles, automobiles, jets, helicopters, yachts, boats that cost more than 2 million rubles, and precious metals & stones, jewelry, paintings & sculptures with cost of more than 300 000 rubles. Specialists don’t rule out that in case the law will be approved it will trigger different tax evading schemes & shadow business growing.

Cyprus Government Representative on Budget Deficiency

Speaker of the Cyprus government Mr. Stephanos Stephanou claimed that his country government is considering steps to implement in order to evade special measures to be taken by the European Union Economic Bodies against it & are listening to the EU recommendations how to diminish budget deficiency down to 3% of the GDP by 2012. It will allow Cyprus to evade tough measures taken by the EU, like it was in the situation with Greece.  Mr. Stephanou stressed that Cyprus drew the attention of the ECOFIN (EU Financial Economy Commission) due to the global economic crisis & external factors as Cyprus, like other EU countries, had invested funds into the economic development in order to activate its growth.  At the same time Cyprus along with Denmark shows better results than Bulgaria or Finland, which are now under special control of the ECOFIN that urged these countries to diminish budget deficiency down to 3% by 2011. However the representative of the Cyprus government didn’t confirm the plans for VAT rate increase for companies & real estate.

Russia’s 10 years development results — Boris Nemtsov’s version

A report on the results of 10 years of Russia’s development prepared by B. Nemtsov & V. Milov comes to the following deplorable conclusions:

1. Corruption is catastrophic. Russia is among the most retarded African countries by  corruption  level & occupies 146th place in Transparency International rating.
2. Russia looses about half million of persons annually due to the very low life span, extremely high level of death tall because of  alcoholism & low level of health care services.
3. During these ten years raw material dependence of the country has only toughen. When in 2000 the export of raw material was of 44% in 2010 it constitutes 65%.
4. The road net is degrading. Due to the high corruption in road construction sphere annual introduction of new roads has declined twice.
5. During these years the number of terrorist attacks grew 6 times. Government orientation on the corrupted Caucasus clans triggered into the lost of control over the North Caucasus republics, meanwhile the federal government keeps doting them with $5-6 billion annually.
6. During the rule of the former RF president social stratification grew 15%. In the 2009 year of crisis the number of dollar billionaires grew twice while 18, 5 million live under the poverty line, unemployment reached 9% & budget employees’ salaries were frozen.
7. Facing budget deficiency & outrageous poverty they continue carrying out multi billion worth construction projects: winter Olympic Games in subtropics, “North stream” & “South stream” gas pipelines, “Altay” pipeline, Asian Pacific Economic Cooperation summit held in Russky island.
8. Pension Fund is ruined. Its deficit is more than one trillion rubles. Due to the population’s aging & decrease of the number of working population 1 million persons a year the perspective is quite oppressive: the authorities are willing to raise tax rates & prolong retirement age. 

Bought a house in Cyprus? Get out! Developer is bankrupt

It is already well known that it is very risky to buy a house in North Cyprus. One of the recent examples: Kulaksiz 5 Condo, located on the occupied territory that was put on auction. Its owners are British citizens who bought the houses in this condo in 2005-2008. The developer without notifying the owners had taken a loan in a bank & then went bankrupt. 

The houses are put on auction so the bank can return its money, in spite the British owners had paid all the sums for the real estate claimed by the developer. Now the owners will have to leave their houses, the authorities of the occupied territory are unwilling to help them in any way. Former leader of Turkish Cypriots Rauf Denktah came toVasilia village in order to support them morally. He said that other 1400 of British citizens are facing similar situation. Their real estate property is to be sold to cover the developers’ debts.

“It is even a more powerful weapon than the Orams case”, — The Famagusta Gazette quotes Mr. Denktash. — Nobody can do nothing with the bank. (The new leader of Turkish Cypriots) Eroglu told me that according to a new law the property of these people would be safe if the owners’ titles had been given. But now the houses must be sold, as they are not liable to the previous law rules. Is it justice?“

This case proved again that occupied Cyprus territories are “ the most suitable place to deceive somebody or to be cheated”, — Turkish – Cyprus newspaper the Afrika notes. While the Yeni Duzen dedicated to the issue an article named “A day of shame”.

Sochi Olympics sponsors & volunteers will be exempt from taxes

Sponsors of The Olympics in Sochi will be granted tax benefits, a representative of the organization committee told. “It is Russia’s liability before the International Olympic Committee, subject to the contract signed. The preferences are for the foreign sponsors that will enter into an agreement with the Committee,”—she told. By the moment the following companies have already signed the agreement: Coca-Cola, Atos Origin, Omega, Samsung, Panasonic &  Visa.

According to some officials corresponding amendments to the Tax Code are ready. They also foresee tax benefits for the sportsmen & volunteers of the Olympic Games. International sponsors will be exempt from VAT, income tax, property & transport taxes from the transactions carried out for the purposes of preparations & celebrating of the Olympics. These companies won’t be acknowledged as taxpayers & can dispute any audit in court. These foreigners will not have to pay for their visas, temporary registration & work permits for the employees. Preferences for the IOC partners won’t be expended on their regular business activity in Russia. Meanwhile national sponsors, such as Russian Railways, Sberbank, Rosneft, Rostelekom & Megafon will not be exempt from taxes at all. All the benefits will remain valid till the end of 2016. The XXII Winter Olympic Games will take place from 7th till 23rd February, the XI Winter ParOlympics will be held on 7-16th March 2014. Totally Russia will spend 950 billion rubles for the Olympics preparations.

World Bank praised Russia for privatization plan

World Bank approved plans of Russian Ministry of Finance to held privatization of 10 state companies & banks. According to the WB estimations this privatization will become a considerable success for Russian economy. The major WB economist for Russia Mr. Zeljko Bogetic noted that such a step means that Russian authorities want to loosen governmental control in certain spheres of economy. According to Mr. Bogetic privatization will “diminish the problem of budget filling, bring new capital & direct foreign investments”.

On 26th July it became known that the Ministry of Finance is going to carry out a three - year privatization plan. They believe they could get up to 900 billion rubles for sending state companies’ shares that will be used to cover budget deficit.  It is supposed that in 2011 the gap between gains & loses of the budget will constitute 4%, in 2012 – 3%, in 2013 - 2% of the GDP. Among the companies chosen for privatization are Transneft, Rosneft, FSK, Rusgidro, Sberbank, VTB, Rosselkhozbank, Russian railways, Sovkomflot & AIZHK. At the same time according to the head of the government press-secretary there is no final decision yet. He claimed that in any case the government will keep the controlling interest in all strategic assets. Commission for budget projects by Russian Prime Minister discussed on 27th of July final list of the assets to be privatized.

Syria wants to join Customs Union

Syria is interested in creating a free trade zone in cooperation with the Customs Union of Russia, Belarus & Kazakhstan, — Syrian president Bashar Asad announced during his meeting with the Prime Minister of Belarus Sergey Sidorsky. Syrian President believes it would help to develop & enforce commercial & economic relations between the countries – members of the Union. According to Mr. Asad Syrian party would like to “find Byelorussian support in this issue.” He noted that about 250-300 billion people live in Euro Asian & Middle East regions. It is very important to ensure transport connections there, especially between Minsk & Damask. In his turn Mr. Sidorsky suggested that Syria finds a pharmaceutical plant in Belarus & later sell medicines in the framework of the Customs Union in Kazakhstan & Russia. The Customs Union of Russia, Belarus & Kazakhstan was found on the 1st of January 2010. Its structure foresees trade liberalization & closer economic cooperation of the countries- members. The leaders of the three countries signed the agreement on the Customs Union on the 5th of July.

IMF: China must weaken yuan & slow down economy stimulation

In the International Monetary Fund they believe that China should allow more flexibility of its currency in order to restore the balance of the Chinese economy & diminish its dependence on export, they also think that lighter control over yuan will shift economic growth towards personal consumption. In the middle of 2008 when world economy started to slow down Beijing tied up the exchange rate of yuan & US dollar. The USA & other trading partners thought that gave Chinese exporters an incontestable advantage in international markets. This summer China announced that the yuan’s rate will depend on currency basket, they already carried out such a policy several years ago. The IMF also urged China to gradually cut economy stimulation in 2011 as long as its constant growth will continue. Last year Beijing made up several decisions aimed to drive the world’s third largest economy out of deep recession, including a set of stimulating measures of 586 billion dollars & bank crediting support.
Since that time the government has restricted the access to the credit & implemented a number of steps with the purpose of preventing economy “heating” & inflation growth.