The number of poor people in Russia increased by 2 million in the first trimester of 2017, affirms the head of the Accounts Chamber Tatyana Golikova. The real income continues to fall, albeit slower than last year. «In the first trimester of 2017, the number of people who lived below the ’poverty line’ was 15% of the total population, or 22 million. This is higher than the 2016 figures, 19.8 million people,» reported the head of the Russian Accounts Chamber.
In January-May 2017 the real disposable income decreased by 0.8%. This is significantly lower than the last year’s assessment, a decrease of 4.8%, Golikova observed. However, negative dynamics of this indicator bear a negative impact on consumer demand, which similarly keeps declining. Real disposable income of Russians declined in April to the level of 2009, observes VneshEconomBank in one of its latest reports. The revenues keep falling since October 2014, with only one brief spell of positive dynamics during this period, in January 2017.
At the same time, the number of dollar millionaires grew in Russia by 10% in 2016, and amounted to 132,000 people. This claim is made in the monthly monitoring report on socio-economic conditions and social well-being, a publication by the Russian Academy of Sciences Institute of Social Analysis and Forecasting. The number of Russians with a fortune over USD 1 billion increased last year (by 11%) to 83. At the same time, the report notes that the number of USD millionaires around the world increased by only 3%, while in the European countries it dropped by 4%. Over the last 10 years, the number of millionaires in Russia increased by slightly more than 30%, which nonetheless is not the world record. «In Australia and Oceania the number of people with a fortune of over USD 1 million increased by 86% over the past 10 years, in Asia-Pacific region — by 84%, in Latin and North Americas — by 41% and 31% respectively, and in Europe by 13% only», observes the report.
Russia’s exports to the EU grew by 38% in cash terms over January—April 2017 in comparison to the same period last year, affirms the review published by the Ministry of Economic Development, «Current economic state status: external activity». The main reason for this is the growth of mean export prices on hydrocarbons. In real terms, however, the exports also increased to most of the EU countries.
Russia’s major trade partners in the EU primarily increased imports of natural gas. As a result the totality of shipments increased by 36.6% to the Netherlands (up to USD 12.4 billion), by 39.3% to Germany (to USD 8.9 billion), by 28.2% to Italy (to USD 4.4 billion), and by 53.7% to Poland (to USD 3.6 billion).
Given the increase of supply to most of the EU states (except for Lithuania, Estonia and Ireland) the fastest growing markets today are Portugal, Greece, Denmark and Croatia. Export deliveries to these countries rose both in absolute and in monetary terms. In other words, Russia increases its export to several markets which is undoubtedly a positive factor, according to an academic expert Ivan Kapitonov. One should keep in mind that the actual growth of the European economies is yet another factor.
Hydrocarbons apart, the EU countries also increased imports of non-ferrous metals, aluminium and copper, although the trade volume in this sector is several times lower than the O&G sales. In case of Greece, the country tripled its supply of the Russian copper (up to 51,000 tons or USD 300 million), while Croatia increased its import of aluminium by a factor of 10 up to 4,400 tons.
Trinidad and Tobago, a small group of islands in the Caribbean, remains the only jurisdiction on the OECD’s blacklist, which «does not respect the international standards of financial transparency and does nothing to progress in this direction» (i. e. remains a Non-Compliant Jurisdiction).
A new OECD report on the subject was published on June 28, 2017. In addition to the blacklist, the report also features a ’grey list’, which includes countries partially implementing the standards (Partially Compliant Jurisdictions). This year the grey list includes the Marshall Islands, formerly black listed. All other offshore jurisdictions, previously included in the OECD black and grey lists, have progressively joined the mechanisms for international exchange of information under the public pressure by introducing the necessary amendments to their home legislative systems.
OECD experts gave a positive appraisal to these serious efforts and moved a number of jurisdictions to the ’respectable’ category of Largely Compliant Jurisdictions. In 2017 the following states were promoted: Andorra, Antigua and Barbuda, Vanuatu, Guatemala, Dominica, the Dominican Republic, Costa Rica, Lebanon, Micronesia, Nauru, the United Arab Emirates, Panama and Samoa.
To avoid getting grey- or black listed, the jurisdiction should comply to a number of standards, including:
• Effective response to requests for information
• Intention to join the mechanism for automatic exchange of tax information
According to the OECD experts, the vast majority of the offshore companies showed significant progress in complying with the international standards of financial transparency within the last couple of years. At the same time, the only country remaining in the current version of the black list (Trinidad and Tobago) is described as «a jurisdiction without a significant financial sector in economy, and therefore it does not pose a particular risk.»
Over USD 1.6 billion was withdrawn from Russia by foreign shareholders. The investors reduced their interest in the investment funds dealing with the Russian papers. Thus, within one week only last June (22 to 28) the foreign investors withdrew more than USD 83 million from these funds.
«The Russian stock market is among outsiders, with a greater volume of funds withdrawn only from China (USD 4 billion), however the Chinese market is also considerably bigger than the Russian.» Among the BRICS group of states, India and Brazil are the leaders in attracting investment. During the first four months of the year some USD 2.6 billion and USD 1 billion were invested in the funds of these two countries respectively.
The high level of executive political relations between Russia and China is not only an important political asset. The strategic partnership between Moscow and Beijing will certainly become mutually beneficial. China is growing to become the largest investor in the Russian economy, and a number of joint projects are being implemented.
Russia-China business relations are on the rise, although there is still a large potential for growth, the Chinese President Xi Jinping said on the eve of his June visit to Moscow. «Foreign businesses came to perceive Russia as a worthy partner, with a clear potential for expanding both their production facilities and the their markets,» the Chinese leader affirmed.
He added that China remained Russia’s largest foreign trade partner for the past 7 years. Last year, the trade turnover between the two countries amounted to USD 69.53 billion, an increase of 2.2% over 2015.
This year the outlook is more than optimistic: in the first five months alone, bilateral trade grew by 26% to USD 32.39 billion. Exports from China increased by 22%, while imports from Russia grew by 30%. In the opinion of the Deputy Minister of Commerce of China, Wang Shouwen, by the end of the year the trade turnover might exceed USD 80 billion.
China continues to explore the potential for developing economic ties with Russia. According to Xi Jinping, China «already became the largest trading partner for the Russian Far East region.» He stressed the successful implementation of major strategic projects in the sectors of energy, nuclear power, aviation, space, and cross-border infrastructure.
The North Sea Route (NSR) is also of interest to the Chinese. This is the shortest way by sea, connecting Asia and Europe, the Atlantic Ocean and the Pacific: the distance is reduced by 3860 nautical miles, or by 34%. As the Chinese already exploit the NSR, they might help Russia turn it into a true rival of the southern routes (through the Suez or Panama canals). By 2020, China plans to shift some 15% of its foreign cargo sea traffic to the Northern Sea Route.
The cooperation in the energy sector is inevitable. Beijing is highly active preparing the infrastructure for the increased import capacity for the Russian crude oil that will start flowing on January 1, 2018 through the new Skovorodino — Mohe — Daqing pipeline. The supply will reach its peak at 30 million tons per year. On top of this, an increase in sale of Russian oil is expected through the territory of Kazakhstan, meaning an additional 70 million tons each year between 2017 to 2023.
In the future, natural gas supply to China will also increase, today the export I mainly in the form of LNG. In 2019 however, the supply through the new ’Force of Siberia—1′ pipeline will begin (via the so-called eastern route).
Finally, Russia increased its capacity to become a part of the new Silk Road transport corridor, tag named ’One belt, one way’. Its goal is to create a trade and infrastructure network that will connect Asia with the rest of the world. Russia would be an ideal partner for the PRC during the implementation of this project.
According to experts, Russia’s strengthened foreign policy stance signals better investment terms to the external partners, as well as more favourable environment for the production relocation and the joint project implementation. «Foreign businesses start perceiving Russia as a worthy partner and a market worthy an expanded production and distribution capacity. This, in turn, attracts foreign capital into the Russian economy, helps increase collected tax, and create new jobs. With the healthy working enterprises, the well-being of the population also grows,» the experts conclude.
On July 14 the Cypriot Parliament adopted long-awaited and long-discussed amendments to the Income Tax Law regarding the tax residency for individuals. The full text of the adopted amendments will be soon published.
As reported, to obtain the status of a tax resident, individuals will need to spend at least 60 days a year in the country, have a residence and work contract, or a position on a company’s board of directors in Cyprus. The company may be controlled by the same individual. At the same time, an important restriction is the requirement not to be a tax resident of any other country in the same time frame, i. e. not to spend 183 days a year or more in any other country in the world.
The Cyprus tax regime without a domicile is one of the most attractive for individuals in the world. The adopted amendments to the Tax Law are designed to attract the interest of the most well-off public from different countries, and is expected to make the citizenship investor program even more popular.
However, investors should keep in mind that neither citizenship nor the tax residency guarantee their exemption from taxation in other countries. Thus, tax obligations remain in place for the US citizens and the Green card holders regardless from their visits to the country. Meanwhile several states in the world practice personal income taxation based of vital or economic interest focus.