Is it possible to painlessly cancel foreign exchange regulation? (VIDEO)

Currently, Russia still has currency legislation requirements that create barriers to foreign exchange transactions and hamper the normal economic activities of currency residents – Russian companies and citizens. Therewith, foreign exchange regulation can solve tax problems rather than macroeconomic ones, and it aims to counter money laundering in international trade. During the discussion, held on January 17, 2019 at the 10th anniversary Gaidar Forum, proposals for reform of the foreign exchange regulation system, the abolition of archaic foreign exchange restrictions, and the transition to alternative instruments of control over cash flow were discussed.

The key report was prepared by Antonina Levashenko, Head of the RANEPA Center of Competence and Analysis of OECD standards. The following persons took part in the discussion: Aleksey Overchuk, Deputy Head of the Federal Tax Service; Pavel Trunin, Leading Research Fellow of the Center for Macroeconomic Research, RANEPA; Vladimir Chikin, Partner, Bryan Cave Leighton Paisner (Russia) LLP; Ivan Khamenushko, Senior Partner, Pepeliaev Group; Philip Kerf, Head of International Cooperation and Tax Policy and Administration, OECD; Sergey Voznesensky, deputy director of the department of state regulation in the sphere of production, processing and circulation of precious metals and precious stones and currency control of the Ministry of Finance of the Russian Federation; Ilya Yasinsky, Deputy Director of the Financial Monitoring and Foreign Exchange Control Department of the Central Bank of the Russian Federation.

The session was moderated by Sergey Sinelnikov-Murylev, Rector of the Russian Foreign Trade Academy.

The speaker presented the RANEPA’s key arguments in favor of liberalization of foreign exchange control and adjustment of legislation, in particular:

  • cancellation of the repatriation of proceeds,

  • introduction of an open mode of foreign accounts using,

  • transfer of norms on notification and reporting on foreign accounts into the Tax Code of the Russian Federation,

  • banning foreign exchange transactions on a territorial basis rather than on a residential basis.

Three areas of adjustment were proposed. The first one consists in the rejection of the institution of currency residency and the abolition of currency residency due to the non-use of foreign exchange restrictions. For this, it is necessary to improve the institution of tax residency, and to switch from the “linear” (> 183 days) to the substantive residency. In addition, incentives should be introduced for acquiring the status of tax residency in the Russian Federation. It was proposed to improve tax administration in terms of two tools: the institution of controlled foreign companies and the concept of the actual recipient of income. It is also important to develop a system of treaties for the avoidance of double taxation.

The second area is to obtain information on foreign accounts. In order to achieve positive dynamics on this issue, it is proposed to concentrate information related to notifications and reporting on foreign accounts in the Tax Code of the Russian Federation. To this end, it is suggested to transfer the norms on notification and reporting from the Federal Law “On Currency Regulation and Currency Control” to the Tax Code of the Russian Federation. It is also advisable to reach the level of full participation of Russia in the OECD automated exchange system. To do this, we have to abolish the requirements for reports submitting on accounts in countries, with which Russia has an international automatic exchange of information. In addition, it is necessary to develop Russia's participation in the OECD work in order to counter the evasion of reporting. To do this, it is advisable to identify differences in the approaches of countries to the accounting of financial instruments for taxation purposes.

The third set of proposals concerns countering money laundering. In this area, it is proposed to form indicators for risky transactions in international trade. To do this, the list of unusual transactions in international trade has to be expanded. In addition, it is advisable to develop cooperation between the Federal Financial Monitoring Service, the Federal Customs Service, and the Federal Tax Service. For this, it is necessary to allow mutual access to the databases of the Federal Financial Monitoring Service and the Federal Customs Service, and to determine the monitoring procedure for the Federal Financial Monitoring Service together with the Federal Customs Service and the Federal Tax Service when investigating laundering cases.

The importance of international cooperation developing was noted. In this area, it is necessary to enter interdepartmental agreements on the exchange of data from goods declarations, information on suspicious transactions. It was proposed to develop guidelines for banks in order to minimize the risks of laundering in international trade.

The expert discussion focused on aspects of the repeal of the Law “On Foreign Exchange Control”, the possibility of taking into account regulatory and control functions in other legislative instruments, and the expected consequences in terms of the efficiency of countering illegal and dubious transactions. An important point was to consider the relationship between the current pace of the foreign exchange control system simplification and the fundamental possibility of meeting export growth goals.


All records of live broadcasts from the Gaidar Forum 2019

10th Gaidar Forum Organizers:

The Russian Presidential Academy of National Economy and Public Administration (RANEPA);
The Gaidar Institute for Economic Policy (Gaidar Institute);
The Association of Innovative Regions of Russia (AIRR).

The general partners of the Gaidar Forum are Gazprom and Gazprombank; strategic partners include Prosveshcheniye publishing house, Coca-Cola, Pharmstandard group, ACIG Group of Companies, the Russian Textbook Corporation, SANOFI, Novartis, Johnson & Johnson, Russian Railways, MSD, and Mastercard; EY, Cisco and Russian Direct Investment Fund are partners. This discussion’s partners are Philips, Cherkizovo and RVC.

The general information partners of the Gaidar Forum include the Rossiya 24 TV channel, Forbes global media company, RBC and TASS news agencies. The official information agency is Rossiya Segodnya. The general radio partner is Business FM. The strategic information partners are Kommersant Publishers, the RT TV channel, Interfax and Gazeta.RU. The main information partners are Profil weekly, FederalPress news agency, and Invest Foresight online magazine. The international information partners are Sputnik and Cision. Other media partners include PRIME news agency, Rossiyskaya Gazeta, RNS news agency, Radio Ekho Moskvy, News.Ru, Polit.ru, Parlamentskaya Gazeta, the PRO BUSINESS TV channel, Strategia magazine, AK&M, BRICS, Ekonomika i Zhizn weekly, National Banking Journal, Expert Tatarstan magazine, the Smart Country information platform, Financial One, Naans Media, and the Public Administration scientific political journal.

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