Capital amnesty law put to a test in Russia

With many Russians believed to have moved assets out of the country to avoid taxes or hide wealth from the authorities, the government introduced a capital amnesty programme intended to encourage individuals or corporations to declare their foreign assets and repatriate their wealth to Russia. Under the capital amnesty law, anyone declaring assets abroad is not required to specify the origin of their foreign wealth and their declarations are immune from further legal or administrative consequences.

The first round of capital amnesty (originally planned to be a one-time affair) took place in 2015−16. The second round was organized in 2018−19. The finance ministry reports that during the first two rounds a total of 19,000 declarations on assets worth about 35 billion euros have been filed.

The third round of amnesty, which lasts through February, requires that any declared assets held in foreign banks be transferred to Russian banks. Additionally, companies registered abroad must either be shut down or registered in one of Russia’s two domestic “tax havens” (i.e. the special administrative regions, SARs, created just over a year ago in Kaliningrad and Vladivostok). About a dozen firms have so far registered in the SARs. Most of these companies are connected to the oligarch Oleg Deripaska, who is on the US sanctions list.

Capital amnesty documents confiscated by Russia’s federal security service, the FSB, have been used this autumn as evidence in an ongoing court case against businessman Valery Izrailit on illegal money transfers abroad in connection with the construction of the Ust Luga port. The legality of using amnesty documents has since been contested in several court instances. The case was also brought to the attention of president Vladimir Putin, who emphasized when the law went into force that the information from amnesty filings should not be abused by officials. The Supreme Court of Russia has now ruled that information provided under capital amnesty act cannot be used as evidence. Similar internal contradictions of the Russian system were on display in last spring’s Baring Vostok case (BOFIT Weekly 23/2019).