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Putin Signs Law in 11th Hour to Satisfy U.S. Treasury

Published: July 1, 2014 (Issue # 1817)



  • United States Department of the Treasury headquarters in Washington D.C.
    Photo: Facebook.com / U.S. Treasury

With just one day left before the Russian financial system was to fall foul of the U.S. Treasury, President Vladimir Putin has signed a law allowing Russian banks to send information about U.S. tax payers to their native government and appease a contentious piece of legislation known as FATCA.

This will come as a relief to Russia's largest banks, who will face the equivalent of a 30 percent tax on various key investments in the U.S. — including the interest and dividend payments on U.S. securities, stocks and bonds — if they fail to comply with the U.S. regulations.

The Foreign Account Tax Compliance Act, or FATCA — which goes into force on July 1 — was initially devised in 2010 as a way to keep U.S. corporations and individuals from avoiding U.S. taxes by funneling money into accounts abroad. The law requires foreign banks to inform the IRS of any accounts held by U.S. taxpayers, to provide information about these accounts on the treasury's request and even to withhold money from clients suspected of tax evasion.

For over a year, the U.S. has been busily negotiating information-sharing agreements with countries worldwide. Eighty-six have already reached official or preliminary arrangements with the U.S., including China, who joined the list just last week, and known tax havens such as the Cayman Islands.

Russia is not on the list. The two sides were deep in negotiations up until March, but the Treasury Department quietly abandoned the talks after Russia's annexation of Crimea and the international condemnation that followed. Russian financiers were left in the lurch and on course to collide with FATCA's rapidly approaching July 1 deadline.

"I have not heard of any other countries who were in a similar situation, who were both deeply integrated into the international financial system and did not have an opportunity to finish the negotiations," said Konstantin Kochetkov, international partner and FATCA expert at the Moscow office of international law firm Morgan Lewis.

Fearful of the penalties for violating FATCA, Russia's second largest banking group, VTB, even decided to "phase out" relations with its 2,000 U.S. clients last month. VTB president Mikhail Zadornov told Interfax on Monday that the bank no longer plans on cutting off its U.S. clients.

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ALL ABOUT TOWN

Saturday, Aug. 2


Gatchina Palace Park Museum will host its second annual Night of Light, an impressive audio-visual show across the night sky. Tickets are 600 rubles ($16).


If graphic design is more your thing then check out Illustration Day, where you will be able to visit an exhibition, attend lectures by professionals and even show experts some of your own work. The event starts at noon at Zona Deystvia, 73 Ligovsky Prospekt. The entrance fee is 350 rubles ($10).



Sunday, Aug. 3


History lovers shouldn’t miss the chance to see reenactments of World War I battles in Pushkin at noon. Besides exciting war scenes, visitors can enjoy live music, historical costumes, an equestrian show and a fancy-dress parade starting from the Moscow gates.


Garage Sale, the popular and growing flea market where nothing is priced over 500 rubles ($14.11), starts today at noon in Loft-Project Etagi, 74 Ligovsky Prospekt. Be sure to get in early to score a bargain. Entry costs 50 rubles ($1.40)



Monday, Aug. 4


Continue the working week with a calm and steady mind with a free yoga lesson at 7 p.m. in the Bukvoyed store at 23A Vladimirsky Prospekt.



Tuesday, Aug. 5


Visit The Romanov Dynasty doll exhibition today, where more than fifty porcelain dolls depicting Russian rulers, and made by Olina Ventzel, will be on show. The exhibition continues through Aug. 31 in Sheremetyev Palace, 34 Fontanka Naberezhnaya.



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