The third largest island in the Mediterranean Sea, off the coasts of Turkey, Syria, and Lebanon, Cypress is a highly regarded tax haven. Home to 830,000 people Cypress, also, houses around 243,000 businesses, some existing only on paper. Many are owned by Russians. Due to a forced conversion of cash into bank stocks to cover financial losses, newly minted Russian shareholders came to control the country’s most important institution, the Bank of Cypress. The bank, by reason of its impact on the country’s economy, in turn, controls the island. Until recently, it was led by Trump’s Commerce Secretary, Wilbur Ross.
The President has shown a personal interest in the island. In March of 2016, Cypriot press reported that Donald Trump was trying hard to get a casino license in the country. That interest is understandable. Under applicable U.S. law American corporate profits that are earned overseas are not taxed until they are repatriated, that is brought home. Now, because of its 12.5% tax rate with generous structural exemptions, Cypress is a wonderful place to park money, legally.
Cypress, also, has tactical value due to its position –a hop, skip, and jump from Russian ally, Syria. When Britain granted the country its independence in 1960, the crown reserved rights to its existing military installations, including those dedicated to signals interception that serve the U.S. and NATO. Britain also maintains an army garrison of 3,000 and RAF facilities. Since 2015, however, Russia has pursued its own military agenda in Cypress, though it denies seeking to change the balance of power in existence. Reportedly, the Kremlin has advanced the idea of expanded Russian air and navy facilities on the island beyond its current holdings.
Due to Ukraine sanctions, and other internal economic factors, Vladimir Putin decided he needed to bring foreign held Russian money back into the purview of his taxing authorities. To encourage this, the Russian President declared a tax amnesty and warned non-compliers that they’d be subject to the full force of the law.
Under the country’s new tax laws, Russians who hold title to foreign entities, including residential and business properties owned through external corporations, LLCs, and partnerships, must declare such holdings. Russia obtained for itself, in the process, tax lien rights, essentially worldwide, over Russian interests, previously, off the books. Trump has spoken of a tax amnesty, too, in order to bring back American money parked overseas by some of our largest corporations, including Apple and G.E.
When he left the Bank of Cypress, Wilbur Ross caused the former head of Deutsch Bank to be installed as chairman. Deutsch Bank, reportedly, has been a reliable lender to Donald Trump. Though more properly in the realm of the Department of the Treasury, the new Commerce Secretary should know plenty about how to repatriate American dollars vaulted in places like Cypress. Bringing those funds back could help build infrastructure, lower corporate taxes, and have a huge effect on the economy. Trump might even, to the extent he has off-shore get to bring them home tax free.