Issue link: https://maltatoday.uberflip.com/i/826629
maltatoday, SUNDAY, 21 MAY 2017 16 News How Russian billionaire's fast loan empire uses Malta to pay peanuts in tax Malta: nerve centre for Russian billionaire Oleg Boyko's multi-million fast loan company. His clients face interest rates that rocket to over 700% in foreclosures, but the millions flowing into his companies here can get taxed at just 5%. And it is all legal STORY BY BLAZ ZGAGA Contributions by Vlad Odobescu, Matthew Vella and Sergejs Pavlovs. Illustrations by Sorina Vazelina (vazelina.ro) and Timi Nicky HE is co-owner of cable and satellite catwalk channel Fashion TV, a Russian billionaire who made his fortune during the ex- USSR's privatization frenzy in the 1990s, before turning to gam- bling, media and financial services. And one of his recent major investments is in the fast loans business, where his companies supply small amounts of money to those in desperate need of cash, but who repay the loans at massive interest rates. 52-year-old Oleg Boyko is the 55th wealthiest Russian (€1.2 billion worth), but has an Italian passport, enjoys all the rights of an EU citizen, holds a fortune in Cyprus and the Bahamas, and his pay- day loan empire, 4Finance, happens to be 'headquartered' in Malta. Naturally, for tax purposes. Originally, 4Finance was a Latvian start-up owned by eight Latvian and Russian founders and shareholders before it was acquired for over €105 million by Boyko. All tax practices here are legal, allowing Boyko's fast loans empire to minimise its tax exposure to almost just 5% tax on profits – thanks to the generous six-sevenths rebate on corporate tax – while clients of the pay-day loan companies across Europe and now, some US states, suffer under near usurious repay- ment terms. Extortionate interest rates One of the victims caught up in the fast loan vice is Daniel*, a Ro- manian national who is still in his 30s, and following a complicated treatment for lymphatic cancer. Despite Romania's free healthcare system, patients have to pay for essential drugs and bribe doctors, nurses and orderlies for medical services – costs that can cripple a family's finances. When Daniel ran out of options after borrowing money from relatives, friends and banks to buy the medicine for his cancer treatment, he turned online to fast loan company Zaplo. So in November 2015, he took out an 800 Romanian lei (€175) loan in his wife's name, who had a better credit history. When he could not pay the loan in time as bills mounted at home, within two months he was facing a request to pay double the loan, €350. A slew of letters from Zaplo followed: the deal was that he would pay the €305 in two tranches. "But after you tie yourself up, you cannot get rid of them," he says now. When he couldn't pay the second part, Zaplo took the case to court. And in February 2017, the court imposed a €575 (2,657 lei) foreclosure, which included €353 in penalties – so the effective an- nual interest rate became 1,988%. "Without any warning, after several months, my wife received a notice from a bailiff that her account would be blocked," Daniel says. The amount they needed to pay also included €100 for the bailiff. His wife's entire monthly income was frozen. "They deprived a fam- ily of its food," Daniel says. After his cancer treatment, he left to work in Germany to cover his debts. He had no money to file a court appeal. Daniel's case is not the only one. Zaplo's Romanian branch was in- volved in 1,570 foreclosures between June 2015 and April 2017. In- deed, the business depends on customers not paying their loans back in time. And it is one of some 17 European subsidiaries of 4Finance. At interest rates that finally reach some 2,000% a year, such ex- tortionist rates have caught the eye of the Finnish Consumer Om- budsman, who has applied for an injunction on the 4Finance sub-