A French entrepreneur’s view in Latvia: “offshore companies” will soon disappear, as they are being replaced by relocating businesses within the EU—and that is a good thing

"Scandals, fines, increased government oversight, large-scale theft and various statutory prohibitions—these are the associations evoked by the word "offshore companies" in recent years," believes French entrepreneur in Latvia Franck Le Marek—he owns an accounting outsourcing and consulting business right here in Riga. "It is all because of unpaid taxes and large corporations’ desire to conceal their actual income. At present, the situation is changing. Businesses are beginning to optimise legally—by relocating within the European Union, seeking economically advantageous and justified jurisdictions".

What is your attitude towards offshore companies?

I do not have any “special” attitude. Every entrepreneur either knows or has at least heard what offshore companies are. Nowadays, offshore companies are a financial instrument that can be used to arrange financial relations and transactions. More precisely, to conceal transactions. In my view, this signals that the country’s domestic economic system does not provide businesses with sufficient opportunities, so they have to seek them beyond the country’s borders.

On the one hand, it is always good when new laws are adopted. At the same time, it is often a matter of populism. There is no country in the world without populism—unless perhaps North Korea (laughs). It must be acknowledged that, under the influence of populist views, laws that are good and supportive of society are also adopted. The worst thing is when small and medium-sized businesses suffer. Large corporations always act thoughtfully. In connection with the changes concerning offshore companies, they have probably already managed to take the “right” steps.

How are offshore companies connected with the business relocation you mentioned?

Everything is logical—one financial instrument is replaced by another. If using offshore companies is no longer “acceptable”, entrepreneurs think about other alternative options. Relocating a business within the European Union’s economic area is one such option.

It is good when, alongside restrictions, new measures that facilitate cross-border relations are also provided for. Such measures, incidentally, already exist to a considerable extent in the EU economy. But I will repeat myself—offshore companies are a signal that they do not exist to a sufficient extent. If the economic and business environment in EU countries is not continuously improved, entrepreneurs will surely find other ways to arrange their relations with one another. This primarily concerns projects that are often carried out by taking advantage of the opportunities provided by offshore companies: start-ups, e-commerce platforms and similar ventures.

So, by relocating a business, is it also possible to optimise tax and social cost funds, avoiding entering the shadow economy and facing tax-inspection sanctions?

Yes. Good practices for conducting business across European Union countries have always been based on fairness, openness and various tax incentives. I hope that the laws adopted recently will also promote the same principles.

The opportunity to relocate a business is unquestionably a positive development for those who adhere to fair commercial practices and want both to earn a good income and pay taxes and comply with occupational safety regulations. Such conduct is a feature of a developed economic environment, in which entrepreneurs analyse the possibilities of the “white” economy before looking for “something else”. Look at what is happening in the world! You will understand that in other economic zones there will not be a similar exchange of information between countries and financial institutions. This is also an advantage of the EU.

Can you currently see an increasing trend in business relocation? Or is it only the future?

It is the present, which began after the latest offshore scandals. I will repeat myself—business does not stand still. New, rational instruments that optimise business are always being found: wages, taxes and competitiveness.

Do you see any other positive changes connected with relocating businesses within the EU?

For me—as an entrepreneur (laughs)—it is business. We collect information about tax systems and legislation in various EU countries, are able to support entrepreneurs by providing the necessary information, and introduce them to partners in other countries through a “one-stop shop”. In Latvia, for example. And this is genuinely important.

Relocating a business is a completely legal way to increase competitiveness. The European Union concludes advantageous economic agreements with other economic zones; for example, this happened with Japan just a few weeks ago.

Laws within the European Union, even when strict, can bring benefits. Business support programmes in economically developed countries, such as Germany and France, continuously support small and medium-sized businesses—with grants, funds… This is precisely the kind of legislation needed in all EU countries. Then there will be fewer offshore companies and more legally optimised businesses.

I study examples of relocation in everyday life, participate in them, and I will tell you this—they are examples of well-considered business activity. I help and support both my compatriots from France, Latvian entrepreneurs and entrepreneurs from other European Union countries.

Ultimately, it is business. Business must be competitive and profitable, and it must be capable of taking bold steps, including in other markets. The European Union’s economy is a success story in the global economy, even if many do not want to admit it. Our common goal is to continue this success story.

Information prepared in cooperation with the communication agency "Advanced Learning & Communications" and the “RATIO INTERNATIONAL” office:

Agnija Zvirbule—Head of the RATIO Latvia office

Dmitrijs Krasnovskis—Head of International Communications at RATIO

Franck Le Marek—CEO