21 SUNDAY MAIL • December 16, 2012
Business & Jobs
Inappropriate to use future revenues from natural gas to avoid signing memorandum Comment George Theocharides A FEW weeks ago I made some comments about the proposal of one of the presidential candidates to use future proceeds from the natural gas through the issuance of long-term bonds. Because my comments may have been misunderstood, I would like to clarify my position. Under no circumstances would it be appropriate to use future revenues from natural gas to avoid signing the memorandum that is forcing us to take measures - as painful as they are - in order to fix the banking, fiscal, and structural problems of our economy. This adjustment of our economy - again as painful as it is - is necessary if we are to regain our lost credibility and be able to borrow again from the foreign markets. Any attempt to avoid signing the memorandum at this moment could cause immense damage, destroying our credibility irreparably. The only reason that would justify the use of future revenues from the natural gas is to promote growth by providing business loans to citizens for innovative ideas to effectively tackle unemployment, especially among young people. But, as I pointed out a few weeks ago, because of the substantial risks in these bonds (credit, inflation, political, social, liquidity and interest rate risks, as well as the risk arising from the
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uncertainty at the moment around the exact quantities and future price of natural gas), the interest rate that will have to be paid will likely be too high and at levels that do not serve our interests and cannot allow us to even service this debt. This proposal of course can be studied, and in the future if circumstances change and the risks to foreign investors are reduced significantly, then we could discuss the use of some of the revenues from natural gas for development projects either by issuing bonds or shares from the state company that is currently being formed. However, right now it is important to immediately sign the pre-agreed memorandum to avoid state bankruptcy and the collapse of our banking system. And let’s not forget that the loan from troika is longterm (30 years) with a very low interest rate (probably around 2.5 per cent) and a long enough grace period where we will not have to pay interest. Exploitation of natural gas is a major national issue and should be given the proper attention from officials. There must be a coherent long-term strategy so that we can achieve the most efficient use of the proceeds from this national wealth. Any hasty decisions made under pressure may prove destructive. George Theocharides is an associate professor of finance at Cyprus International Institute of Management (CIIM). He is also the director of the MSc programme in finance and banking
14-Dec-2012
1.3054 0.8095 1.2039 109.37 1.2292 1.2749 8.6370
1.3132 0.8144 1.2135 110.24 1.2538 1.3004 8.8097
07-Dec-2012
1.2919 0.8048 1.2037 106.29 1.2244 1.2718 8.5189
1.2997 0.8096 1.2133 107.14 1.2489 1.2972 8.6893
UK son for US tax account law The UK determined to demand more tax information from crown dependencies
Investment Bill Blevins Bill Blevins is Financial Correspondent at Blevins Franks International
HERE is a move towards automatic exchange of information as the new global standard in international tax co-operation, with the US leading the way with its groundbreaking Foreign Account Tax Compliance Act (FATCA). The UK has now also opened negotiations with its crown dependencies, Isle of Man, Jersey, Guernsey, which are likely to herald in a new era of automatic exchange of information between the islands and the UK. FATCA was introduced by President Obama in 2010, to start in 2014. It obliges foreign financial institutions over the world to provide information on US citizens to the US tax authority. The institutions have to enter into compliance agreements with the US treasury to report on US clients. If they fail to do so, they will have to pay a Foreign Account Tax Compliance Act (FATCA) was introduced by President Obama in 2010 withholding penalty of 30 per cent of the payments made to them. extending the principles behind FATCA to “an exchange of Offshore centres like the Channel Islands and Isle of Man information” with Britain, and that further discussions are are keen to sign up to avoid the penalties, which could dam- expected. age their finance industry. In October they announced that No details of the content of the meeting were given. they will negotiate partnership agreements with the US. In a joint statement, the Channel Islands said: “The UK US FATCA would mean that the UK’s crown dependen- and the crown dependencies share a common commitment cies exchange more tax related information with the US to combat tax evasion and to participate generally in interthan they do with the UK, so it is not surprising that the national efforts to combat financial and other crime includUK treasury is now seeking to impose its own version on its ing fiscal crime.” This implies that they will accept an agreeterritories. ment modeled on the US FATCA. On November 23, International Tax Review reported that The Isle of Man also re-affirmed its long-standing policy to its journalists had seen a leaked copy of a draft government meet established international standards. document detailing how a UK scheme would work. If legislation goes ahead, it is expected to come into effect It called the scheme “son of FATCA” and claimed it would on January 1, 2014. “deal an almost fatal blow to tax evasion through the UK’s The biggest change will be in Jersey, since Guernsey and tax havens”. the Isle of Man already automatically exchange information According to the report, the agreement would require the on savings income under the EU Savings Tax Directive. automatic exchange of information for each reportable acAccording to Richard Murphy of Tax Research UK, who count of each reporting financial institution. This would was speaking to the Telegraph, information exchange curinclude full details of all beneficial owners of the account, rently impacts around four to five per cent of total funds in including those whose identities might otherwise be hidden Jersey. If the agreement goes through, over 90 per cent of by trusts or companies. funds will be subject to information exchange. Geoff Cook, chief executive of Jersey Finance, acknowlFor advice on legitimate tax planning in Cyprus, speak to edged that: “It is well known that the principles behind the an experienced advisory firm like Blevins Franks. US FATCA arrangements are being looked at by the OECD, EU and UK”. Any statements concerning taxation are based upon According to the Observer, the UK government could force our understanding of current taxation laws and practices its territories to comply by threatening to veto their own which are subject to change. Tax information has been summarised; an individual should take personalised advice. FATCA agreements with the US. On November 30, Jersey, Guernsey and Isle of Man gov- To keep in touch with the latest developments in the offernments confirmed that they had attended an explana- shore world, check out the latest news on our website www. tory meeting with treasury officials about the possibility of blevinsfranks.com
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30-Nov-2012
1.2964 0.8081 1.1996 106.71 1.2338 1.2776 8.5690
1.3042 0.8129 1.2092 107.56 1.2585 1.3032 8.7404
1wk 1mth 2mth 3mth 6mth 1yr
USD 0.18 0.21 0.26 0.31 0.51 0.85
EUR 0.02 0.05 0.10 0.12 0.22 0.44
GBP 0.48 0.49 0.51 0.52 0.67 1.01
CHF -0.01 -0.01 0.00 0.01 0.07 0.26
JPY 0.10 0.13 0.15 0.18 0.29 0.50
LIBOR RATES (London Interbank Borrowing Rates) AS AT 7/12/2012
CAD 1.00 1.06 1.15 1.23 1.52 1.94
AUD 3.05 3.15 3.19 3.25 3.38 3.71