Press review: Russia scrapping tax deal with Cyprus and US expanding presence in Poland / News / News agency Inforos
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Press review: Russia scrapping tax deal with Cyprus and US expanding presence in Poland

Press review: Russia scrapping tax deal with Cyprus and US expanding presence in Poland

Top stories in the Russian press on Tuesday, August 4, prepared by TASS

Kommersant: Russia plans to scrap tax deal with Cyprus

The Ministry of Finance implemented Vladimir Putin's March promise to unilaterally withdraw from agreements with low-tax jurisdictions - the ministry has announced preparations for the denunciation of the double taxation treaty with Cyprus. With the decision, the authorities intend to push holdings to move to Russian "offshores" - special administrative regions. The unexpected step will disrupt the existing financial flows for business, Kommersant writes. However, experts told the newspaper they expect Russia and Cyprus to conclude a new tax agreement.

Negotiations with Cyprus were difficult, but observers still expected the agreement to get an update. It was reported that a new agreement would be signed during Russian Foreign Minister Sergey Lavrov’s visit to the island. On Monday, anonymous negotiators at the Cypriot Finance Ministry were surprised by the decision of their Russian colleagues, Kommersant writes.

According to various estimates, under the agreement, 1.4 trillion rubles ($19.16 bln) were moved from Russia to Cyprus in 2018, and 1.9 trillion rubles ($26 bln) in 2019. The Finance Ministry considers it a scheme under which revenues of Russian origin are paid to Russian beneficiaries through a transit jurisdiction.

Cancelling the agreement on the avoidance of double taxation with Cyprus means that taxes on many transactions with companies registered there will have to be paid both in Russia and in Cyprus, the newspaper noted.

"Rejecting the agreement with Cyprus is a shock for Russian business. Financial flows will definitely change their course," Head of tax dispute resolution group at Bryan Cave Leighton Paisner Alexander Erasov told Kommersant.

Meanwhile, some experts believe that the countries might conclude a new agreement in the future. "Negotiations with Cyprus have been going on for a long time, it cannot be ruled out that new conditions will be specified in a new agreement. The parties might have considered it inexpedient to make a large number of amendments to the previous document," Director of Tax and Legal Consulting at KPMG in Russia and the CIS Alexander Tokarev told Kommersant.

Vedomosti: Additional 1,000 US troops to be deployed in Poland

The United States and Poland have completed the Enhanced Defense Cooperation Agreement (EDCA) talks aimed at strengthening and deepening the two countries' partnership in this area. According to the new treaty, another 1,000 US troops will be deployed in Poland. The Pentagon said additional troops are being sent to Poland to support armored units and combat aviation brigades, joining some 4,500 already stationed there. Experts told Vedomosti that the US do not see this step as a violation of Russia - NATO relations.

According to the US Department of Defense, the objectives of the EDCA talks are containing Russia, strengthening NATO, and encouraging allies in the changing strategic balance of power in Europe. According to the statement, NATO’s continued presence in Poland would improve its strategic and operational flexibility.

As expert at the Russian International Affairs Council Alexander Yermakov told Vedomosti, Poland has sought to increase the American military contingent on its territory since joining NATO. "Since then, Poland has been trying to strengthen its partnership with the United States as much as possible. ... Trump likes this a lot, it correlates with his propaganda slogans that the allies must pay for the presence of US troops," the expert explained.

At the same time, according to Yermakov, 1,000 US troops stationed in Poland will be mostly serving in the rear detachment, dealing with logistics, infrastructure, and integration with the local military. "Half of the [German] contingent is returning to the United States, half will be relocated to Europe, primarily to Italy, to the Black Sea region, possibly to Romania. And Poland will receive units on rotation in larger volumes. According to the US, this does not violate the fundamental ‘Russia-NATO’ act, where NATO promised not to deploy significant permanent forces in the former countries of the Warsaw Treaty Organization," Yermakov explained.

Izvestia: Poland, Ukraine, Lithuania want to form new union

Poland, Lithuania, and Ukraine have agreed to deepen cooperation and create a structure called the Lublin Triangle. The purpose of the format is to reconsider relations with Brussels and Moscow, Izvestia writes, noting that the "Russian issue" is all but central in this informal alliance. According to experts interviewed by the newspaper, lack of resources and difference in goals might hinder the alliance.

The parties plan to intensify not only political, economic and social cooperation, but also to establish more intensive ties in the military. The countries stated that they do not recognize the "occupation" of Crimea by Russia and gave their support to "the restoration of Ukraine’s territory". The parties also actively oppose the Nord Stream 2 project.

All participants in the Lublin Triangle pursue their own interests. Ukraine is interested in deeper cooperation within NATO and the European Union. Warsaw is trying to create its own center of power within the EU, which could become an opponent of Moscow and Brussels, Director General of the Russian International Affairs Council Andrey Kortunov told Izvestia.

"All three countries are very critical of Moscow. Poland’s leadership can be seen clearly here. The current attitude of the European Union towards Poland is taken into account: statements on the reduction of subsidies, structural funds. This is Warsaw's bid for subregional leadership," the expert noted.

Kortunov believes that this association can at best become a lobbying structure in Brussels. "I don’t think it’s going to be anything serious. First, these are very different states. Poland and Lithuania are member countries of NATO and the European Union. Ukraine is not a member of any of these organizations and isn’t likely to join them in the foreseeable future. Second, these are relatively poor states, their resource base is limited," Kortunov told the newspaper.

Kommersant: Russia plans to increase budget spending on high-speed railway

The Russian government plans to increase direct spending on the Moscow-St. Petersburg high-speed railway, Kommersant wrote Tuesday with reference to the document sent to the Ministry of Transport by Deputy Head of Russian Railways Sergey Kobzev. In addition to the already announced capital grant of 200 bln rubles ($2.73 bln), the budget will invest another 248 bln rubles ($3.39 bln) into the project company’s capital. In addition, there are plans to place bonds for 427 bln rubles ($5.84 bln). Who will buy these securities is not yet clear, Kommersant writes.

The total funding for the project remained the same - 1.7 trillion rubles ($23.25 bln), including 1.3 trillion rubles ($17.78 bln) in extrabudgetary investments. The document also makes no mention of the use of money from the National Wealth Fund, which was expected to become a significant part of the project’s overall funding. One of Kommersant's sources claims that the new financial model was specifically developed without the participation of the Fund.

Head of Infoline-Analytics Mikhail Burmistrov calls attracting extrabudgetary funds in the amount of 1.3 trillion rubles ($17.78 bln) in the current environment "utopian." These funds could come from state banks, but then these are "pseudo-budgetary funds," the analyst told Kommersant. Taking currency risks into account, the model does not look attractive to foreign investors, he said. From the point of view of construction, the launch of the railway into operation by 2027 looks realistic, but by this time the passenger traffic required to pay off the project will be unattainable due to increased competition with aviation, Burmistrov concluded.

Izvestia: Tickets to Istanbul, Turkish resorts cost 30% more

Ticket prices from Russia to Turkey and back have increased by about 30% compared to last year, industry representatives told Izvestia. Meanwhile, the beaches of Antalya are overcrowded with tourists, and hotels are dealing with peak demand, the Turkish parliament told the newspaper. Meanwhile, the Russian Union of Travel Industry told Izvestia that there is no need to fear crowds on the Antalya coast - Russians generally pick larger hotel complexes.

Press service of travel planning company OneTwoTrip told the newspaper that the number of tickets purchased from July 24 to July 31 increased almost 6-fold compared to early July. The largest number of tickets (round trip) was purchased to Istanbul, the average price was 26,000 rubles ($355.7). Travel booking service Aviasales told Izvestia that the price of tickets for the Russia-Turkey-Russia route increased by 26% over the year.

Despite the fact that planes have been leaving for Istanbul and Ankara for three days, there are still few Russians in Turkey, the newspaper wrote. They mostly travel for business purposes, to visit relatives or travel independently, Executive Director of the Alliance of Travel Agencies Natalia Osipova noted.

"In our opinion, the deferred demand for travel, formed amid the pandemic in April-June, has already been partly satisfied on domestic routes. In July, we saw a complete recovery in air ticket sales in Russia and even an increase of 6%," travel service Biletix told the newspaper.

Meanwhile, there have been reports of large tourist crowds on the Mediterranean coast. As for hotels and beaches in popular Antalya, Vice-President of the Russian Union of Travel Industry Yuri Barzykin believes that the information is exaggerated. "There is definitely enough space on Turkish beaches. Moreover, our fellow citizens prefer to relax in large hotel complexes with their own beaches," the expert told Izvestia.

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