Over the period from 1991 to the present day, some $148 billion has been withdrawn from Ukraine to offshore jurisdictions, according to various estimates, according to Inna Shovkun, a leading researcher at the Institute of Economics and Forecasting of the National Academy of Sciences of Ukraine, who wrote an article for the Dzerkalo Tyzhnia newspaper.
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Reforming the fiscal system aimed at de-offshorization and deshadowing of business can become one of the sources of raising funds for the industrial development of Ukraine she wrote.
”According to various estimates, starting from 1991, $148 billion has been siphoned from Ukraine to offshore jurisdictions. Not all these funds were withdrawn from the country by corrupt kleptocratic authorities. The business uses offshores to legally reduce the tax burden and risk reduction (such as the loss of funds in bankrupt banks, and raider seizures, simplification of judicial protection of its interests against unreasonable tax claims),” the article reads.
Shovkun notes that the creation in Ukraine of favorable fiscal conditions will facilitate the return of capital in the form of foreign direct investment and loans.
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”Even now, offshore funds play an important role in industrial investment. In particular, the share of Cyprus in foreign direct investment, accumulated in the industry of Ukraine, was 19.3%, or $2.6 billion (as of October 1, 2016), the Netherlands had 12.8%, or $1.7 billion. Funds come from offshores to the economy also in the form of debt financing,” the expert stressed.
She states that now, the funds circulating in the informal sector of the economy account for approximately 35-40% of the official GDP.
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