Tax: Russia eyes tax on global digital services firms – Latest News

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Russia wants to tax foreign companies earning profits from digital services provided in Russia, Deputy Finance Minister Alexei Sazanov said in an interview with accounting firm KPMG published on Wednesday.

Finance Minister Anton Siluanov last year promised not to raise taxes after Russia had targeted the mining, tobacco and oil industries to help plug holes in its budget. A rise of two percentage points in income tax for wealthy Russians came into effect on Jan. 1, as did a tax on deposits.

“Large foreign digital companies are earning profits from providing services in Russia, which in principle are not currently taxed in our country because often they do not have offices here,” Sazanov told KPMG, without naming the foreign firms he had in mind.

“Therefore, we will strive to change the situation and tax this profit.”

The OECD is currently steering a group of nearly 140 countries including Russia negotiating the first update in a generation to rules for taxing cross-border commerce to account for the emergence of huge digital firms like Google, Apple and Facebook.

“There are discussions going on within the OECD about creating a supranational tax, which would then be distributed between different countries,” Sazanov said.

“But so far there has been no tangible progress on this issue so some countries, such as Italy, Spain, England and France are independently introducing digital taxes on their territories.”

He said Russia would examine the global experience and cited the case of Britain, which has had a 2% tax on the revenues of search engines, social media services and online marketplaces in place for almost a year.

“We will look at the results and think about the advisability of introducing it in Russia,” Sazanov said. “For now, there is no final decision on the matter.”

The United States has said digital services taxes imposed by the likes of Austria, Spain and Britain discriminate against big U.S. tech firms and are inconsistent with international tax principles.

Sazanov also said the government did not plan to extend a profit-based tax to more oilfields until 2024.



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