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Protection of property ownership rights and capital flows

Globalization of capital markets is becoming an important factor affecting the problem of the protection of property ownership rights.  Under the liberal regime for the inflow and outflow of capital investments that exists in the world, states are forced to enter into competition with one another for investors.  One of the main parameters of international competitiveness in this sphere is a low level of country risks; in first order, the risk of expropriation of assets.

The problem of trans-border capital flows is deepened by the presence of offshores with knowingly more attractive conditions for conducting business operations and protecting assets.  Weak protection of property ownership rights becomes a powerful incentive for taking direct assets out beyond the border and reducing the taxable base within the confines of a country.

In the simplest form, an offshore for countries with good protection of property ownership rights – this is merely a “tax haven”.  But for countries with unstable property ownership rights, an offshore becomes a way to protect capital from expropriation.

The placement of assets in a jurisdiction abroad was inherent to Russia starting in the 1990s in connection with the peculiarities of the process of privatization and the existence of the threat of a revisiting of its results with the use of various mechanisms.  But with time, this “birthmark” of Russian privatization did not disappear.

The urgency for Russia of this aggregate of problems is obvious:  in
 
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