It’s no longer a secret that the reason why so many large companies technically base themselves out of what are seen as otherwise obscure countries is down to one main consideration – corporation tax. Coincidentally, or rather not.
In an exercise purely designed to maximise profit and limit outgoings, rather than pay the higher rates of tax required of them within the countries that they do the majority of their business, large companies and banks will instead locate areas that are seen as ‘tax havens’ – keeping as much of their money for themselves as possible. While that may seem like an understandable business decision on the face of it, these are controversial measures, with some companies facing backlash and protest over their lack of support for the economies from which they profit.
A tactic that can severely harm the reputation of an otherwise well-liked business, there is now a certain level of shame associated with being branded ‘tax avoiders’, with some companies even facing boycotts as a result – although the money saved still seems to outweigh any negatives caused as a consequence. Pressure has been put on governments by both small business owners and protestors to force companies operating in this manner to still pay the level of tax they would owe if they were registered for tax in what they deem a more honest and appropriate way.
Cyprus, of course, is far from alone in operating in this manner. Bermuda, Holland, Luxembourg, Singapore, Ireland, Mauritius, Monaco, Switzerland, the Bahamas, the Isle Of Man, the Channel Islands and the Cayman Islands are all also popular destinations for businesses looking for tax relief. Also used by individuals, too, there are tax schemes which are run through several of those destinations that are designed to ringfence funds away from Revenue and Customs, with many of those exposed during the highly publicised Panama Papers scandal.
Lots of Russian money has historically been involved in Cyprus, with the same true of the country today. A longstanding occurrence, their political friendliness over the years is what acted as the catalyst for the relationship to blossom. While it’s not known accurately how much Russian money there is in Cyprus, intelligence and financial experts have suggested somewhere between €8 billion to €33 billion may be realistic, which is obviously far from insignificant.
Finance companies have more than just tax benefits to consider in Cyprus, however, with many Forex companies basing themselves out of the country too. While the likes of OANDA remain based in North America, many other businesses have been drawn by their EU membership, MiFID, busy financial sector, reliable internet and telecoms infrastructure and existing skilled workforce.