Macedonia plans to set up tax haven

Hold that pose Prime Minister

The Balkan press is reporting a mixed reaction to the Macedonian government’s announcement yesterday of plans to create a tax haven in that country. While financial experts are reportedly cock-a-hoop about the plan (who doesn’t like a free lunch?), and Prime Minister Nikola Gruevski (pictured) says that the tax haven will boost employment, others are concerned that illicit money will flow in from the surrounding region. 

One critic, former Macedonian Governor, Petar Goshev, has warned about the possibility that illegal capital pouring in the country will damage the rating of Macedonia’s economy, and jeopardise the country’s aspirations to  join the European Union.

It is hard to find any positives about this proposal.  The Cypriot experience should have set warning lights flashing in Skopje 18 months ago (see here and here).  In too many cases the employment creation benefits ex-pat lawyers, bankers, accountants and tax specialists, and has damaging knock-on effects elsewhere in the economy, not least in the housing markets.

To make matters worse, Prime Minister Gruevski’s suggestion that following the laws and regulations of the United States, Germany and Britain (ranked 6th, 8th and 21st respectively on our Financial Secrecy Index) will boost the credibility of the proposal, in practice achieves the exact opposite.  Macedonia is henceforth on our watch list.