Tax shelters licking their chops in Cyprus

April 1, 2013 at 12:24 PM
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NICOSIA, Cyprus, April 1 (UPI) -- The race is on among tax shelters to see what offshore financial center will walk away with the failing Cypriot banking business, a key financial leader said.

"We have been thrown to the wolves, and now the wolves have responded," said Parliament member Nicholas Papadopoulos, who heads the government's financial and budgetary affairs committee.

The New York Times reported Sunday there was seething resentment that bank depositors in Cyprus would be forced to pay a major portion of the country's $18 billion bank bailout.

That is a step the international community in Europe did not ask of Greece, Ireland, Portugal or Spain when those countries were given international aid.

Papadopoulos said the European Union was "punishing the whole country, just to hit Russia."

Depositors from Russia have parked billions of dollars in bank accounts in Cyprus, a well-known tax haven. Much of the Russian deposits are believed to be ill-gotten gains from Russian criminals -- hence the reluctance to bail out banks in Cyprus without asking for a contribution from depositors.

Meanwhile, financial firms from Switzerland, the Cayman Islands, Malta and other financial centers that boast of their ability to dodge tax authorities are sniffing around Cyprus looking for disgruntled depositors, the Times said.

A Swiss financial firm, the Gonthier Group, touted its ability help clients avoid paying taxes.

In an email, the firm said it offered an investment alternative, "which is extremely low-profile, not classified as a bank account or trust and thus very much under the radar of national fiscal authorities."

The financial firms are denying they are there to upset the apple cart or help clients break the law.

Tilly Schneeberger Gonthier, a principal of the Swiss firm, said in an interview Gonthier Group was "absolutely not" in the business of helping clients avoid taxes.

Another group, Bateman Financial, said the Cayman Islands was the place to park money.

"Given the inherent pressure banks will be placed under in Cyprus, your firm may see a need to consider other jurisdictions when consulting clients," the company said in an email.

"The Cayman Islands can offer the stability that is currently desired."

Cyprus, meanwhile, has a lot to lose. Bank assets in Cyprus are about eight times the size of the country's gross domestic product, the Times said.

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