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Does Depardieu herald Russia as a tax haven for Europe?

Fleeing France's high taxes for Russia's flat 13 percent rate, the French actor spoke of Russia in glowing terms during a high-profile meeting with Vladimir Putin over the weekend.

By Correspondent / January 8, 2013

French actor Gerard Depardieu, left, greets Russian President Vladimir Putin after his arrival late Saturday at the president's residence in Sochi, Russia.

Mikhail Klimentyev/Presidential Press Service/RIA Novosti/AP

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Moscow

French movie star Gerard Depardieu has returned to his native habitat in western Europe following a tumultuous Russia visit that has left behind a nation collectively scratching its head over the instinctively authoritarian Vladimir Putin's quirky decision to bestow Russian citizenship upon a cantankerous foreign tax rebel, and the equally odd spectacle of Mr. Depardieu accepting it amid a fusillade of lavish praise for Mr. Putin's regime.

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Most analysts say the event was probably a big domestic propaganda win for Putin, who has been under criticism – even from members of his own government  – for imposing a seemingly vindictive ban on US citizens adopting Russian orphans in response to US legislation that targets official Russian human rights abusers.

Some suggest that Depardieu's move might trigger a wave of wealthy Europeans, disgruntled by ever-higher tax rates, to move to Russia where everybody pays a flat 13 percent income tax.

Such talk is encouraged by news that French actress Brigitte Bardot is also threatening to apply to Putin for a Russian passport, albeit for completely different reasons. Ms. Bardot, an ardent supporter of animal rights, is angry about plans by French authorities to euthanize two circus elephants thought to be carrying tuberculosis.

"In the West they badly understand the specifics of our tax system. When they do learn about it, you can expect a mass migration of rich Europeans to Russia," tweeted Deputy Prime Minister Dmitry Rogozin on Saturday.

"If someone like Depardieu wants to be a Russian citizen, that's good. Putin made a beautiful gesture," by granting his wish, says Vladimir Zharikhin, deputy director of the the official Institute of the Commonwealth of Independent States in Moscow.

"If rich people want to come here, why not? Plenty of talented Russians, like the tennis player Maria Sharapova, live in the US but hang on to their Russian passports.... It's not just about patriotism, but also about money. So, let rich people rush here and pay that 13 percent to the Russian treasury," he adds.

But Rustam Vakhitov, head of tax practice at the Moscow office of International Tax Associates, a Dutch tax consultancy, says that if things were that simple, rich tax evaders would have been flocking to Russia since the flat tax was initiated about a decade ago.

"In principle it's possible that rich Europeans could manage to maintain residency in Russia," by utilizing loopholes to get around the six-month-per-year residency requirement to be eligible for the 13 percent rate, he says.

"But they'd have to spend a few months here. In practice, the number of Europeans who'd be willing to come and live in Russia is probably quite limited," by a variety of factors, including distance from Europe, lifestyle and language, he says.

"Some may come here. I'm not saying Russia's a bad place, but there are other countries that probably offer better terms," for wealthy tax fugitives, he adds.

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