Google and Apple may be forced to pay more tax in Russia

Russian authorities may start trying to extract more tax from foreign tech firms such as Google and Apple, according to a report by Vedomosti.

There appear to be a couple elements to this push. Firstly, the Russians have taken note of recent changes in the European Union that force the suppliers of digital services to collect sales tax based on the location of the customer, rather than the location of the supplier. This is designed to stop the big tech firms from funnelling their EU revenues through low-tax jurisdictions such as Luxembourg and denying most European countries their tax proceeds.

Russia has the same problem – apps and content sold through Apple’s platforms, for example, are provided by foreign companies, and no Russian tax is levied.

The second apparent strand relates to the Russian web giant Yandex, which is embroiled in multiple battles with [company]Google[/company] over the U.S. firm’s restrictive practices around what software and services can be installed on Android devices. Yandex has given evidence to EU investigators who are looking into this matter, and it’s also prompted an investigation by Russia’s antitrust regulator with the support of the Microsoft-backed “FairSearch” group.

According to Vedomosti, Google is paying way less tax than Yandex is – around $8 million in 2013 compared with Yandex’s $53 million, a disparity considerably wider than that between Google and Yandex’s market shares in Russia (roughly 32 percent versus 59 percent). This may be legal today, but now the authorities are considering changing the law.

The initiator of all this was apparently Putin aide and former communications minister Igor Shchegolev. It’s all at the discussion stage right now, with other participants including government representatives and media regulator Roskomnadzor, but it looks like western tech firms – already facing incoming restrictions on where they can store Russians’ personal data — have something new to worry about in Russia.

Yandex declined to comment. I’ve asked Google and [company]Apple[/company] for comment and will add it in if and when it arrives.

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