Final Word from Monday, February 13, 2017

In Oct. of last year, before corporate bonds became one of the hottest topics in Czech politics, the FAÚ financial-analytical unit of the finance ministry and the CNB took legal steps against majority-owner Roman Popov of ERB Bank of Prague (which has since lost its license). The FAÚ blocked its accounts, and the CNB filed a criminal complaint against Popov for suspicion of using a €60m bond from M&A InvestConsult of Austria to strip assets from the bank. Popov claims that he was targeted because he was Russian. The CNB concluded that the only purpose of the bonds was to divert money from ERB. There are big differences between this case and the issuance of tax-free corporate bonds by hundreds of Czech companies in 2012, but there are similarities too. Many of the corporate bonds were clearly issued for the sole purpose of circumventing the 15% withholding tax. If the finance ministry isn't taking action, it's likely because to do so would require that the ministry also examine the tax-free bonds of Agrofert. Popov had the bad luck of issuing the wrong kind of fake bonds. [Czech Republic tax authority one-crown]

Glossary of difficult words

to strip assets - to remove assets from a company, typically at a below-market rate;

to divert - to cause (someone or something) to change course or turn from one direction to another; to reallocate (money or resources) to a different purpose.

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