Rosneft Scam

It is now pretty clear that some kind of scam is being perpetuated with the Rosneft “privatization” in order to avoid Western sanctions.

Dmitry Gudkov writes on Facebook:

It seems that Igor Ivanovich Sechin is not telling us something. The triumphant sale of Rosneft shares to Glencore and Qatar’s sovereign fund no longer appears so triumphal. The trader claims that rather than billions, it’s contribution will be limited to a modest 300 million euros.

And as for Intesa, the head, Antonio Fallico “…is openly called “Putin’s man” in Italy.”

In an interview in late 2014 with RT, Fallico openly stated that the “EU sanctions against Russia are suicide”.

Intesa was also the organizer of the sale of Rosneft’s shares.

Gudkov sites an article in Finanz.ru:

A source told Finanz.ru that “Glencore and the Qatar Fund appear to be a ‘cover’ in the deal.” The scheme may work as follows: Rosneft issues bonds and invests cash in a certain fund, which then buys its shares and gets a commission, similar to the mechanisms used for privatization in Russia in the 1990s.

That is Rosneft took the approximately $9.42 billion that they made off the bond auction last week, and that money was then used to buy Rosneft’s own shares. But it was done in such a way so as to avoid any problems with the sanctions regime.

Alfred Kokh replied to Gudkov’s post, suggesting that it may have been something along the lines of a managerial buyout. Usually, in such cases the managers have no ready capital, and so have to take loans from banks to make their purchase. But Kokh noted that in the 1990s Lukoil and others made no secret of what they were doing. So why, he asks, is Sechin hiding something?

Meanwhile, Vladimir Milov, who has written about Rosneft quite a bit recently, wrote in Forbes Russia: “…that it was possible that Rosneft is turning over some of its shares in payment of its bonds placed for 600 billion rubles. Rosneft received pre-payments from Glencore in 2013-2015 of up to $5 billion for future deliveries, he noted. Therefore, the sale of the bonds would cover Rosneft’s debts to Glencore but would be sent to the Russian budget as if “new money.” Milov also noted that Qatar owns 9% of Glencore.”

What likely happened is that Rosneft either couldn’t or wouldn’t spend their own money to buy the shares, so some way was needed to get more capital. But because of the sanctions that was problematic. I have written before about the company’s money woes. In addition, numerous analysts have stated concern about the effect Rosneft’s purchase of its own shares would have had on the ruble. So this was the best way they could come up with to skirt the sanctions and get capital.

Rosneft Privatization

Contrary to rumors, Rosneft has not bought its own 19.5% stake in the company from Rosneftegaz. Instead the privilege has gone to commodities trader Glencore and Qatar’s sovereign wealth fund. Each will own half of the stake, according to Rosneft CEO Igor Sechin.

The discussions were kept very quiet. There was no hint in the media at all that Glencore was even interested. I personally still have questions about the legality of the transaction, since Rosneft is (technically anyway) under sanctions. But I doubt that Glencore would have gone through with the deal if there had not been guarantees that they would not be taken to court or fined for participating. They have managed to keep to the letter of the sanctions, but not the spirit. But we are talking about Glencore, after all, as many Russians were quick to point out on Twitter.

So the deal has gone through, Sergei Aleksashenko writes on his blog, and the Reserve Fund can “sit untouched for another couple of months.”

There are four main takeaways from the deal, he says.

First, Igor Sechin came out the winner in this round. It is clear that Prime Minister Medvedev and his government knew nothing and had no involvement in the transaction. As a result, “we need to expect some external manifestation of this.” That is, Rosneft may win in other conflicts as well. For example the ongoing legal battle to access of Gazprom’s Sakhalin-2 pipeline.

That being said, it does appear that Sechin did lose on at least one of his preconditions for the sale to “outsiders”: that new shareholders would have to wait to get seats on Rosneft’s board of directors. But, Aleksashenko writes, “…judging by the words of the president… this condition has been removed, and, to some extent, Igor Sechin will be forced to live by the rules and not by concepts.”

“Third, we won’t know the whole truth about this deal for a long time. At least as long as it [Rosneft] is headed by Igor Sechin. And the main thing here is the unknown question: did the new shareholders receive any other benefits as part of this transaction or not? With Glencore it is easier. The company could be satisfied with the long-term contract with Rosneft to sell a substantial portion of its oil [220,000 barrels per day – ed.], perhaps even at about market conditions – as one of the world’s largest traders, Glencore can earn on sales of oil, and its purpose is to hold the maximum share of the market.”

But with the Qataris it is more difficult to say, Aleksashenko continues, “…they don’t need oil”, but they’re businessmen and don’t want to take a loss on their purchase.

“And, judging by how all the other transactions of Arab funds in Russia are structured, we can assume that Rosneft (or Rosneftegaz) issued the sovereign fund a protective option in case of falling prices, pledging in this case to buy back the shares.”

And finally, but not the least important, Aleksashenko concludes: “the privatization of Rosneft has not happened.” The State (in the form of Igor Sechin) is still calling the shots, with nobody to check it, “and will continue to do so.”

Russia’s “Liberals” & the Crimea Question

Alexander Sytin writes on Facebook about Russia’s so-called “liberal” opposition and why they cannot and will not garner support among the population on their current trajectory.

For more than a year now, he begins, the Russian “liberals” have been discussing two questions:

“What will happen to Russia after Putin?” and “What should be done about the future fate of Crimea in this context?”

This latter question has become something of a political litmus test. Sytin compares it to the period of the Bolshevik revolution when the question was “are you for the Reds or the Whites?”

He says that he has no political ambitions and has no desire to place himself in any “political camp”. Most terms like “liberalism”, “democracy”, “communism”, and “fascism” are nothing more than “empty labels which have lost all meaning in our post-modern era…”

Nevertheless, Sytin continues, “I think that sovereignty and, therefore, the territorial integrity of Ukraine, has been recognized by the international community since the proclamation of its independence, [so] it should be fully restored.”

And whatever decision is made should be made locally and “…not by the unilateral will of the Kremlin.”

The only significant position is that of the Western governments who “are not inclined to accept the results of the “referendum” nor the accession of Crimea to Russia. Everything else is just words… demagoguery: “annexation,” “reunification”, “the restoration of historical justice”, all of these statements speak only of the position of the speaker – no more!”

And as for the first question, Sytin says, it is “…similar to the debates [between] the Westerners and Slavophiles during the reign of Nicholas I, [and] there is absolutely no sense [in it].”

“The liberal discourse today in Russia is not a question of change in Russia, [but rather] the integration of “leaders of liberalism” into the existing power structure, with Putin or not is a secondary question. They want to inherit / participate / privatize the system of government which was created in the last decade and a half.”

And they are not interested in a Russia “without its imperial component”. All they are interested in is a seat on the board of “Russia Inc.”

The reason Russians do not go out to protest is not because they are committed to the current group of elites, or even to the annexation of Crimea. In fact, nobody really cares about Crimea now except a few “frostbitten patriots”, and Kremlin propagandists. But people don’t take to the streets because they see no difference between what they currently have and what the so-called “liberal” opposition is offering them.

“This is implicitly felt by those representatives of the liberal party, who speak of the absence among them of a “moral authority”.”

And when Khodorkovsky is interviewed, he is always asked about Crimea.

“And he cannot answer this question, because it has no answer to the main eternal Russian question: who will be the successor, as well as what will be possible with this successor…”

The Kremlin really shot itself in the foot by incarcerating Khodorkovsky rather than letting him either go abroad like Gusinsky and Berezovsky, and let him reside there with them in relative obscurity. Or Sytin jokingly says that the Kremlin should have given Khodorkovsky a position in the government, and then blamed him for the economic crisis. But everybody still wants to talk about Crimea.

“Real democratic liberal opposition to the current Russian regime does not exist and I do not see any prerequisites for its appearance.”

It is possible to train the future leaders, but who would teach them? Mikhail Khodorkovsky and Alexei Kudrin? Then the Regime can rest easy because “with or without Putin it will exist forever.”

“What will the outcome of this whole situation be? There are two options, as Inozemtsev explains, either a more or less long period of decay followed by decomposition and the almost inevitable end of… [those currently in power] or defeat in a cold / hybrid / hot war (desired by the Kremlin). Therefore the only question that can replace the question of what will happen to Russia after Putin is: as a result of any sociopolitical, economic and temporary perturbations will the present regime give way to the new? In other words, what is the mechanism for the transfer of power from the current ruling elite to the new?”

And what should be done about Crimea? Sytin leaves that in the hands of the Ukrainians. They should take their case to international court and have it decided “at the highest level.”

“Claim that the sanctions regime cannot be reviewed every six months, but it will remain the same and subject to change only in being made stricter, as long as the territorial integrity of Ukraine is not fully restored.”

It also needs to be emphasized “…that the sanctions are not the result of the failure of some sort of the Minsk agreements, but a response to the aggressive policy of the Kremlin, posing a threat not only to Ukraine but also to the entire world order. Moscow says that the problem of Crimea is settled and closed? And exactly the same attitude should be in relation to the sanctions – the question of which is settled and closed.”

He concludes:

“I was asked to submit recommendations for a future mythical President of Russia about what to do about Crimea. The answer is simple: convene an international conference under which to issue the relevant procedural forms to return Crimea to Ukraine.”

After three months out from under the thumb of Russian domestic policy, the lives of peoples living in Crimea will improve, and nobody in Russia will even remember what happened.

As for Ukraine, they must do their part too. By ensuring some autonomy for the peninsula, and lustration (but not reprisals) will be necessary for the leaders of the “Crimean Spring”.

“At the same time, especially at first, it will be necessary to carefully monitor to ensure the path to power in the peninsula is firmly closed to Russian nationalist radicals.”

 

Ulyukaev Affair

Rosbalt held a round-table earlier this week on the so-called “Ulyukaev Affair”. Former Economic Development Minister Ulyukaev remains under house arrest for allegedly taking a $2 million bribe for his decision on the Rosneft takeover of Bashneft.

The round-table included the Director of the “Political Experts Group” Konstantin Kalachev, and Nikolai Mironov of the Centre for Economic and Political Reform.

Kalachev told the group that he thought that what happened to Ulyukaev was a signal to Prime Minister Dmitry Medvedev that his future prospects were not bright. And that Medvedev had no hope of being President again.

Kalachev also did not rule out more arrests:

“The genie is out of the bottle, and none of the elite can feel completely safe. The temptation to turn this story into the start of the presidential campaign – in response to a request for justice in society – is there. The popularity of officials is not high, as you know, and the old theme of “Good Tsar, bad boyars”… just might be implemented through high-profile arrests.”

Nikolai Mironov thought (as I do) that the case against Ulyukaev was to show people that the Kremlin was doing something to fight corruption.

“At the same time… data from the latest opinion polls shows that Russians’ belief in anti-corruption policies remains low even after the detention of a member of the government.”

Mironov recalled that after former Defense Minister Anatoly Serdyukov was let off easy for his role in the Oboronservis fraud case it became clear that there was one set of rules for the elite and another for everybody else. And Russians have not forgotten this.

Mironov also suggested that the rules of the game had changed, and that nobody could be considered safe. But, he pointed out, Russia still has a clan system that relies on “backroom agreements”.

Kalachev agreed, saying that “…the Ulyukaev affair continues to demonstrate “the Byzantine nature of our politics”.”

Meanwhile Reuters reported earlier this week that Ulyukaev had been discussing diluting the state’s share in Rosneft further than currently planned, though not right away. Rosneft’s sale is supposed to go through next month, with 19.5% of the state’s holding in the company up on the auction block. The state will then own 50% of the company, “a blocking stake”. The government is anxious to offload the shares before the end of the year in order to get the cash that it desperately needs.

Nostalgic Reformers

The Yegor Gaidar Fund hosted an event earlier this month to commemorate and discuss the 25th anniversary of the “start of economic reforms in Russia”.

Participants in the first government of Yeltsin – Gaidar recalled how they made decisions about economic reforms during the collapse of the USSR, and reflected on the reasons for the successes and failures of their activities.

The meeting was led by Gennady Burbulis, President of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin, and Higher School of Economics’ Yevgeny Yasin. Anatoly Chubais, Petr Aven, Andrei Nechayev, Boris Saltyakov, Stanislav Anisimov, and other members of the first “Gaidar government” also participated.

burbulis-et-al-15-nov-2016
Burbulis speaking. There are more photos of the event here

“The participants tried in hindsight to discuss not only the results of their activities for transforming the country… but also the mistakes they made and which could have been avoided. In particular, Andrei Nechayev said that their main mistake was that they gave all their attention and energy to the economy and did not engage in politics.”

But on the other hand, “…Gennady Burbulis said that Yeltsin immediately rejected the idea of establishing a party of power and put greater attention on propaganda because he wanted to be a president for all Russians.”

The excuse that “we just didn’t explain what we were doing well enough” also made an appearance at the discussion.

President Putin’s former economic advisor, Andrei Illarionov, called the participants out on both claims. He reminded his readers that these people did in fact take part in politics: participating in parliamentary elections, creating the political party SPS etc. And that they did in fact do a lot of PR work to “explain their actions”, writing articles and books, giving interviews, doing lecture circuits, and so on.

Nevertheless the former members of the reform government tend to evaluate their activities for the most part as a success.

Petr Aven said:

“We in the reform government wanted the best, but it did not work out as usual, but in a different way. Despite all of our errors we managed to change the country, and now it has become completely different.”

The group concluded that “…the modernization begun in the 90s remains unfinished, and the economic agenda of the first government remains partially relevant.”

Academy Reforms

Last week Russian President Vladimir Putin publicly called out the Academy of Sciences for allowing high-ranking bureaucrats to join.

“Speaking on Wednesday at a meeting of the Council for Science and Education, President Vladimir Putin said that late last year he asked officials to abstain from elections to the Russian Academy of Sciences… and he appealed to the head of the Academy, Vladimir Fortov.”

However, according to Vzglyad, when the elections to the Academy were held in October, “many of the civil servants disobeyed the President.”

Sergei Leskov writes in Rosbalt that what happened was “an unprecedented event and its underlying causes require analysis and interpretation.”

“The immediate reason for the conflict situation was the fact that… a half dozen [high-ranking] officials were elected to the Academy. A few months ago, Putin gave a written order that officials were not to run for the RAN… that is we are talking about direct disobedience.”

And, as we found out yesterday, the president followed through on his threat, and signed a decree dismissing four of the officials who had violated the ban.

“Putin, as the builder of the power vertical cannot understand how officials openly violated his will, which cannot be misinterpreted. In this sense, the president’s decision to dismiss officials from the civil service… to an academic path is quite logical.”

There seems to be some mass movement of civil servants into the Academy, a position that is for life once a person is allowed entry. The process to gain a seat in the Academy is a rather long and arduous one.

“Each applicant must be nominated, must go through six rounds of interviews, and voting is always secret. The procedure is consecrated in a century of tradition, and, by design, should serve as a barrier to entry into the ranks of the Academy the unworthy public. This ensures the independence of the Academy from the authorities, but on the other hand, it strengthens the state itself, which out of short-term motives in every era tends to dictate its will onto the Academy. There are examples where the independence of the Academy saved her prestige.”

But that’s a rather idealistic view of the situation, Leskov continues.

“…of course you do not have to be a professor of human nature to guess that a secret ballot can be controlled and regulated…. It is necessary to conclude that not only the conceited officials, but also the management of the Academy took a risk in going against the president.”

So why did the Academy decide to go through with this dilution of its ranks by adding new members from the bureaucracy?

“Following the recent ruthless reform [that took place in 2013], when officials deprived the Academy of its rich assets, it [the Academy] felt a threat to its existence. We must fight for survival! According to the laws of Darwinism, social mutations have become inevitable. The strong devour the weak. So we must be strong. One of the coping mechanisms – to attract the alpha male.”

So the Academy added these officials for protection, he alleges.

“Some colleagues of [Academy President Vladimir] Fortov told me: “How could Putin humiliate the president of the Academy?” But we must admit that from the start the Academy itself and its president humiliated himself by swallowing the joke of a reform… When you yourself are willing to be humiliated, do not be surprised when others humiliate you.”

And, Leskov concedes, “…in our country the scientist has always been dependent and humiliated…. it is no coincidence that in our history there are practically no examples where a scientist has become an independent and wealthy man like Watt, Edison, Sikorsky, Gates, Jobs, Musk…!”

If in the Soviet era, it was rare for the elite to become members of the Academy (“it was a violation of party modesty”), then “in democratic times, habits have changed. Nobody has taken statistics, but there is a sense that the current election to the Academy has turned into a promenade show for VIPs.”

“The Academy of Sciences is often criticized for its lack of innovation. This is slander. A striking innovative achievement of the Academy is the trade in academic status…. But today the issue of the professional dignity of the scientist… is not necessary.”

What is happening in the Academy is a microcosm of what is taking place throughout academia in Russia, Leskov concludes.

“Russian academia is gradually and inexorably turning into a citadel of scientific nomenclature. And this leads to further brain drain. Young scientists, instead of living in Russia and moving up the career ladder, are forced to flee in search of the best scientific niches in the West. Youth… sees no prospects. It is characteristic that the Academy did not name [2010] Nobel Prize winner Konstantin Novoselov, who is a Russian citizen, but strengthens the rear of policemen, oilmen, and counterintelligence agents.”

“Once the Academy of Sciences was the most robust repository of moral and spiritual values of society. Today there are no intellectual and moral leaders, like Sakharov…  and none are visible on the horizon.”

*For more details on the “reforms” forced on the Academy by the Kremlin in 2013, see this article from the Institute of Modern Russia.

We Deserve a Flat Tax

Many are claiming that the introduction of a progressive tax would help the poor and put additional funds in the budget, but this is false, writes Grigory Yavlinsky. In fact, it is just the opposite.

“In the current [economic] environment, with the introduction of a progressive tax, the amount of tax revenue would be reduced, “gray” [off the books] salaries will rise, a significant portion of businesses will seek to go into the shadows, people with high incomes will create a scheme to reduce tax payments with the help of legal tricks. But the middle class, professionals, small and medium businesses will pay in full. As a result, the incentives for increased efficiency and productivity will be reduced. We will have to work nearly 6 months to pay for the personal income tax, the insurance premiums… and fees. All this will lead to… a huge amount of people choosing to withdraw into the shadows.”

Another reason people don’t want to pay is that they are not sure that the government is being responsible with the money they are giving it, Yavlinsky continues. “”No taxation without representation.”  This is a political question: if people believe their government and can influence it, they will calmly pay high taxes.”

“In the meantime, if it [the government] really wants to fight poverty and inequality through the tax system, please – promote a non-taxable minimum income, exempt single parents, large families, and people under 25 from paying taxes… not to mention the change in the direction of the budget expenditures: only one day of the war in Syria in 2015 cost taxpayers about 170 million rubles, or thirteen thousand average pensions. Direct the money to pay pensions, and increase the minimum wage.”

Of course, some will argue that if you make exemptions for certain groups, then people will use them. And you will have more single parents, etc. “And as for budget spending, there is the argument: “it is necessary to save Bashar Assad!”

“That is why, because of the distrust of the state and [an environment] conducive to fraud at all levels… we are only fit for a flat tax. Because the flat tax is a tribute to the low level of economic and political culture in our country.”

And this can only change if Russia’s economic and political cultures change, Yavlinsky concludes.

“In the meantime, it’s too early to talk about it.”

Sacred Flat Tax

Ania Dorn wrote on her Facebook page yesterday regarding government claims that Russia has a 13% flat income tax. Yes, she acknowledges, a person’s gross salary is taxed 13%. But another 30% is paid by employers: 22% goes into the pension fund, 5% for health insurance, and 3% for social insurance. So, for example, she explains, for you to receive a net salary of 1000 rubles, your employer is actually paying 1643 rubles.

Then there is the housing and communal services tax, and the new tax for capital repairs (“which most of us can hardly expect to see in our lifetime”), and “taxes on real estate and cars…”

“And then miracles begin. Because in addition to this, we pay excise taxes on fuel, alcohol, and cigarettes…” and VAT (which is 18%) is included in the price of goods. Of course, she says, VAT is paid by the seller to the state, but it is included in the price of goods purchased, so that the buyer bears the burden of this, and the 43% tax the employer pays for their workers, and the 20% tax on profit. And then there is the “Platon” tax that truckers are paying to deliver the goods to the vendors.

Dorn concedes that small and medium sized businesses could file for refunds for the VAT but that the process is so cumbersome that most of them prefer to avoid it.

As a result goods and services cost at least twice their actual cost.

And meanwhile, she continues, “the average salary in the country is recorded as 64.3% higher in official statistics, than what citizens actually get their hands on – with the result that the president is surprised when a regional teacher runs to him with complaints that she is receiving 15,000 rubles rather than the 25,000 ruble [official salary]”.

“But… the king-father – the great economist with a PhD…” still thinks that the salary is 25,000 and believes in the “sacred” 13% flat tax (“nowhere in the world is lower”). And instead he blames the “fifth column”, calling those who complain “provocateurs, spies, SBU [Ukraine’s security service] agents, and State Department collaborators.”

State Fire Sale

Vedomosti reports today that the Federal Property Management Agency is debating new ways to dispose of its assets in order to get the best deal.

According to the law on privatization, the state’s shares in companies must first be put up for auction. And if that process doesn’t work, then they move to a public auction where there is a minimum set price, and anyone can bid above that. This year, 90% of the auctions did not take place, and they moved to public auction. Meaning that the State did not get the market value or even as much as they had anticipated for the stakes they sold. For example, the sale of a stake in the state diamond corporation, Alrosa.

As a result, the Federal Property Management Agency is discussing options to rectify this.

One option, Vedomosti reports, would be an auction without naming a minimum price. But this is complicated by the fact that you would need some minimum set of people or companies bidding, otherwise you could potentially have issues with collusion, as happened with the loans-for-shares auctions in the 1990s. Yukos, for example, bid against itself by creating shell companies that appeared to have no connection with Khodorkovsky’s bank. Thus guaranteeing that they would be the only ones bidding on the assets, and keeping the price low.

But this option is slow and cumbersome because what happens is that you have to keep going to auction if you don’t have enough companies to meet the requirements.

So officials recognize that it is necessary to simplify and speed up the process. One idea that is being considered is “declaratory privatization – when the asset is sold at the request of the investor”.

How would this work? “…any organization, without waiting for ads [by the Agency], can apply for privatization; an investor can pay for an audit and evaluation [of the company].” The Agency would then have to “…notify the public about the application, [and] wait, for example, three months…” If there are no opposing applications, the asset would go to the initiator.

“Experts have suggested this method for a wide range of assets.” But the Agency wants to tread carefully because they think this is really only appropriate for smaller assets, and not larger ones.

“According to the Federal Property Management Agency, in the first half of 2016, the State was a shareholder or had the right to participate in the management of 1627 joint-stock companies.”

But “state-owned companies are active in the acquisition market” (see, for example Rosneft’s purchase of the Bashneft shares and its plans to purchase a stake in itself next month).

640 JSCs are under the control of the State, and of those, 83% are up for sale, according to the Agency.

“Since the 2000s, the government has contributed to the charter capital of some state-owned companies [e.g. Rosnano, Rostec, etc.], but the law forbids the 100% ownership of the company… therefore the State wasn’t given 100%, but 100% minus one share. And these are the shares now hanging in the balance. Another 19% of companies are in the process of bankruptcy.”

Meanwhile, the Agency is attempting to improve its marketing strategy, in order to widen the pool of buyers. They have begun “posting information on websites, and in news agencies, buying advertising in the mass media and billboards, and print booklets.

It is unclear what President Putin actually thinks about all of this, Vedomosti concludes.

“On the one hand, large-scale privatization has shown that it is very difficult for the authorities to part with state property…” an official told Vedomosti. They would prefer to keep going round and round until they get the best price. At the same time, Putin said this week that there are other considerations besides money.

In other words, the Regime is anxious to get these assets off their hands, and collect what cash they can, rather than wait to get the best price. This is even more necessary now as the 2017-2019 draft budget anticipates draining both of the Finance Ministry’s reserve funds.

Tax “Reform”

Russia’s government is developing plans to introduce a progressive personal income tax, reports the Russian media. Russia currently has a flat tax of 13% that was introduced during the first Putin administration.

Deputy Prime Minister Olga Golodets said that she thought that creating a progressive income tax scale would help to alleviate poverty, by exempting a certain portion of low income earners (similar to the US system).

Russia’s Finance Minister Anton Siluanov is opposed to the plan of reintroducing a progressive income tax, but told the State Duma last week that the government has held talks about “the pros and cons of this decision”. He pointed out that in the current economic environment with “falling real incomes, [and] no sustainable growth”, that businesses would move underground.

Dmitry Abzalov, of the Centre for Strategic Communications, told Rosbalt that “…a progressive tax is perceived by citizens as more equitable.”

“At one time the flat rate was introduced in order… to return citizens to pay taxes. Now, we must understand that there are some taxpayers, such as the employees of state-owned and large private companies. For them it will be very difficult to move their salaries into offshore companies. Accordingly, the payment of the tax will fall exactly on this segment. But some entrepreneurs will go offshore because it would unprofitable for them to pay this tax.”

He compared the situation to what happened when France “reformed” their tax system. “…some of the private companies simply left the country…” because the tax burden was too high. And, Abzalov notes, “…some Russian companies, large businesses, can also be re-registered within the borders of the Customs Union, Kazakhstan and Belarus.”

Former MP Dmitry Gudkov, reminded his followers on Facebook that while the income tax is 13%, the actual percentage is closer to about 43% if you factor in pension and health care contributions, etc.

And what will happen if this is implemented, Gudkov asks rhetorically. More jobs will be paid under the table. And for the “very rich”, it “…will be an added incentive to carefully leave, as Alisher Usmanov recently did.”

And where will that extra money the government hopes to get from this proposal go? Not to help the ill and the poor, but to finance the Regime’s imperial ambitions, to pay for the war in Syria, “and to line the palace floors of the corrupt”, Gudkov concludes.