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    Russian Press - Behind the Headlines, December 7

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    Russia to Get Back at US for Magnitsky List/ Experts Forecast Medvedev’s Resignation Next Spring/ European Commission Targets Offshore Schemes, Affects Russian Businesses

    MOSCOW, December 7 (RIA Novosti)

    Moskovsky Komsomolets

    Russia to Get Back at US for Magnitsky List

    The US Senate’s adoption of the Magnitsky Act has angered Moscow. Russia’s Foreign Minister Sergey Lavrov promised reciprocal action against American “human rights abusers.”

    Moscow will respond by barring US citizens who violate human rights from entering Russia, Russian Foreign Minister Sergey Lavrov said on Thursday.

    “I reiterate that we will close entry to Americans guilty of breaching human rights,” Lavrov said, commenting on his meeting in Dublin with US Secretary of State Hillary Clinton. That was how Lavrov replied to a question about the US Senate debate on the Magnitsky list.

    Lavrov did not, however, give the names. Perhaps he was referring to those who are involved in the criminal persecution of convicted arms dealer Viktor Bout, or pilot Konstantin Yaroshenko.

    In both cases the only evidence against the Russians comes from the US secret services coercing the Russians to confess.

    The Russian Foreign Ministry described the US Senate decision as a “performance in the theater of the absurd.”

    “We do not want to give up the positive things we have gained over recent years through great efforts. But one should realize that the act approved by the Senate will have a negative impact on future bilateral cooperation. Responsibility for this certainly rests wholly and entirely on the US,” says a comment on the Ministry’s website.

    The US Senate on Thursday passed a bill on visa sanctions against Russians involved in what the Congress believes were violations of human rights (the so-called Magnitsky Act) while at the same time lifting the trade restrictive Jackson-Vanik amendment introduced against the Soviet Union in 1974.

    The bill was adopted by 92 US Senators, with four voting against. US President Barack Obama will sign the bill into law soon. A “stronger” version of the bill was adopted even though a “softer” option was proposed.

    The document commemorates lawyer Sergei Magnitsky, who died in a Moscow pre-trial detention cell in November 2009. He worked for the Hermitage Capital Management investment foundation and exposed a multi-billion ruble tax swindle by Russian officials. His death caused a widespread response in Russia and in the West. This Congressional act is intended to penalize those blamed for his death.


    Experts Forecast Medvedev’s Resignation Next Spring

    Dmitry Rogozin would be the most probable successor, if Medvedev resigns next spring, say experts at the Moscow-based Institute of Globalization Studies.

    Mikhail Delyagin’s institute has prepared a political forecast for Russia in 2013 which includes the surprising suggestion that Dmitry Medvedev’s government will likely resign in a few months.

    “The inter-clan war under the facade of fighting corruption has grown to such a scale and become so unpredictable as to pose a threat to Russia’s ruling class,” experts write.

    This clan conflict will subside early next year, but it will leave Medvedev’s team, and the liberals, greatly weakened and nearly defenseless. This implies that the government could be forced to resign in March or April 2013, the experts say.

    The scandal around former Agriculture Minister Yelena Skrynnik is an aggravating factor, because she is believed to be a close friend of Medvedev and thus her case could have loud political repercussions.

    According to a survey, Dmitry Rogozin is the most likely candidate for Medvedev’s post. However, the situation could still swing back and forth several times, Delyagin said.

    Gleb Pavlovsky, head of the Effective Politics Foundation, who previously consulted the presidential administration, believes that Medvedev will likely resign.

    “The Kremlin has made no secret of its desire. It’s only a matter of timing and what Vladimir Putin can offer Medvedev in return for his resignation,” Pavlovsky said.

    Igor Yurgens, head of the Institute of Contemporary Development, where Dmitry Medvedev chairs the Board of Trustees, admits that Medvedev may have to resign, but does not share Delyagin’s view on the timeframe.

    “Only very serious developments could force the president to reshuffle the government,” Yurgens said.

    He said Russia’s financial reserves and expensive oil, which costs $100-$110 per barrel, are weighty arguments in favor of a less radical solution to the country’s problems.

    Medvedev’s press secretary Natalia Timakova said Vanga (a blind Bulgarian clairvoyant who died in 1996 – Izvestia) was better at forecasting the future than these experts.

    “According to the Constitution, the issue of (a government) resignation can only be decided by the President and the State Duma,” Timakova said.

    Alexei Mukhin, head of the Center for Political Information, does not think the cabinet will resign next spring. Judging by Putin’s usual personnel policy, only an extraordinary event could lead to such an outcome.

    He said many of the experts have negative attitudes toward Medvedev and his team, “but this doesn’t mean the government will resign.”

    Moreover, Mukhin believes that Medvedev has a special agreement with Putin.

    “Medvedev will not resign, but some cabinet members might be replaced,” he said, adding that a government resignation is possible only in the event of major social failures, for example in healthcare, which have not happened yet.

    This is not the first forecast of Medvedev’s imminent resignation. When the parliament approved Medvedev as prime minister in May 2012, some experts said he would not last more than six months.


    European Commission Targets Offshore Schemes, Affects Russian Businesses

    European Commission Tax Commissioner Algidras Semeta has unveiled a plan targeting large corporate tax avoidance through tax havens. The plan is pending the approval of the EU finance ministers.

    Under this plan, the member states will be able to introduce, for one month, a so-called reverse charge mechanism, under which the taxable recipient is subject to a VAT liability instead of, as a general rule, the supplier of goods or services.

    The plan also aims to intensify the exchange of tax information within the EU.

    Finally, the European Commission proposes a series of important changes to the member states’ tax legislations. They will be able to compile “black lists” and forego the double taxation agreements in cases of lower tax rates in countries on the list. At the same time, national tax regulations must be proportionate and specifically aimed at preventing "purely artificial arrangements," which lead to tax evasion, while “minimizing one's tax burden is a valid commercial process.”

    The European Commission also plans to enforce the 1997 Code of Conduct for Business Taxation more strongly, which will enable the authority to require a cancellation of tax privileges for non-resident companies in EU countries.

    These harsh measures have been provoked by a series of tax scandals involving large international corporations such as Google, Amazon and Starbucks. Google avoided taxation in countries where it actually provided its services through a scheme with a headquarters in the Bermudas and operations in Ireland and the Netherlands. The French authorities alone are now claiming 1 billion euros in back taxes from the Internet powerhouse in addition to the 5 million euros it already paid, according to Le Monde.

    Ireland may become one of the European Commission’s targets, FT wrote. Semeta said in September that the measures could affect other tax havens including Austria and Luxembourg.

    Russian companies that have affiliates in the “blacklisted” countries may be affected by the plan as well, said Alexander Zakharov, deputy head of the consultancy DS Express. If a Russian company minimizes tax paid in Germany, where it turns a profit via an affiliate in Jersey, it could face a tax claim in Germany on the grounds of a “lack of corporate responsibility” in the country where the company actually makes a profit, he added.

    RusAgro head, Maxim Basov, does not believe the planned crackdown would necessarily affect Russian companies or their European subsidiaries. The campaign is aimed at businesses that are registered in tax havens but have sales operations in Europe, mostly in the IT sector, he said.

    In Russia, similar measures are in the works. Prime Minister Dmitry Medvedev approved an anti-tax evasion plan on Thursday. The Ministries of Finance and Economic Development and the Federal Taxation service are to draft a relevant bill by the fourth quarter of 2013.

    RIA Novosti is not responsible for the content of outside sources.

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