"Google tax" will lead to higher prices in IT

In the near future, the country's authorities are going to amend the draft law, which will force Russian and foreign IT companies to pay VAT. Specialists of the Russian Association of Electronic Companies (RAEC) believe that, in turn, this decision will lead to higher prices for all electronic services.

In response to the decision to adopt amendments to the draft law, the RAEC this week published a corresponding document on the website, in which it noted an increase in the tax burden on domestic companies. The management of companies is unlikely to put up with lower profits and increase the cost of services for its users. It is noteworthy that after the publication of the official position on the draft law, the document itself disappeared from the RAEC website, and the representatives of the association have not yet commented on the situation.
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“Foreign companies will be forced to start a taxpayer’s office, use an electronic signature, as well as open their own bank account, but with current laws it is impossible,” RAEC notes.

Deputies expect the growth of budget revenues of 52.8 billion rubles in 2017 due to the introduction of amendments to the bill, but this forecast is too optimistic, according to RAEC.

Most of all unlucky developers of applications who will be forced to pay twice - when making a profit from the App Store, Google Play or other application stores. Often, the commission of such services is about 30% and they certainly will not reduce it to compensate for the tax burden due to VAT obligations.

This week, the relevant committee of the State Duma approved the idea of ​​the bill and recommended the State Duma to adopt it in the first reading. The authors of the bill are the deputies Andrei Lugovoi and Vladimir Parakhin, who believe that it is more profitable for Russian users to purchase content from foreign companies because of the reduced cost. The reason for this is that they consider just the payment of VAT by domestic companies. To compensate the expenses of the Russian companies, the deputies propose not to charge taxes on the sale of services to foreign users.

A similar practice is observed among the European Union - now companies mainly pay taxes in countries such as Ireland, the Netherlands and Luxembourg, in which taxes are as low as possible. But the European Commission is considering banning the use of such a scheme with the requirement to pay taxes within the EU countries in which the purchase was made. Revenues from such sales can go to the development of IT-business within EU countries, but so far the bill is far from being adopted.

[Updated] RAEC has updated its position on the bill:

The position of the Government on the draft law may lead to the expansion of the tax base of Russian IT companies without receiving tax deductions commonly used in the Internet industry abroad. It is necessary to discuss the text of the bill with the participation of industry experts in order to increase the competitiveness of the Russian Internet industry.

In comparison with the original documents, the tone of the publication changed from a sharply negative one and now RAEC is trying to find a compromise with the State Duma by organizing a round table discussion of representatives of the IT industry. The representatives of RAEC did not comment on deleting the previous version of the document.