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.

Russia’s Runa Capital invests $3.4M in database firm MariaDB

Moscow-based Runa Capital has invested €3 million ($3.4 million) in MariaDB, the open-source database company that offers what began as a MySQL fork (Google and Wikipedia are big-name users). Runa, which is headed up by founders of Acronis and Parallels, is already a backer of the Nginx web server and platform-as-a-service outfit Jelastic. In a statement, MariaDB CEO Patrik Sallner said his firm was looking forward to collaborating with Runa and its other open-source portfolio companies in its enterprise push.

Spotify reportedly scraps Russian launch plans

The music streamer Spotify was all set to plow into the Russian market, having poached a former Google exec, Alexander Kubaneishvili, to lead the offensive. However, that plan has gone out the window for now.

According to Russian broadcaster RBC, Kubaneishvili announced the pause on Monday, citing Russia’s political and economic situation, as well as pending Russian legislation about regulating the internet. Spotify will not launch in the country “for the foreseeable future,” he said, adding that he does not work for the company anymore.

According to TASS, the firm is also shutting down its Russian office in its infancy. RBC reported that Spotify’s Russian launch had already been delayed because it had failed to agree partnerships with local mobile operators, though TASS indicated some progress had been made with Vimpelcom. I asked Spotify for comment on all this, but the company refused to provide any.

Russia’s ruble is having a very rough time, largely due to the falling oil price and sanctions related to the country’s invasion of neighboring Ukraine and annexation of the Crimean peninsula.

Meanwhile, the country has also been pumping out various new laws designed to clamp down on internet freedom. The most relevant is probably Russia’s local data storage mandate, through which it intends to force web service providers servicing Russians to store their personal data in local data centers. This rule is set to come into force in 2016.

Google and PayPal join Crimea sanctions efforts

In the latest move by a U.S. tech firm to abide by sanctions on Crimea, Google will stop Android users on the peninsula from downloading apps from Google Play, according to Russian reports.

The freeze will reportedly commence at the start of February. Google will also stop Crimean residents from using AdWords or AdSense due to the export sanctions, but will still allow the use of Google’s free services.

EBay’s PayPal also said on Friday that it has stopped servicing residents of the Ukrainian peninsula, which was annexed by Russia last year, due to the sanctions levied by the U.S. and the European Union in December. Crimeans also can’t buy games from Steam due to Valve’s compliance with the sanctions.

Apple cut ties with Crimean app developers earlier this week, removing their products from the App Store and blocking their internal accounts. Google has not as yet officially said that Crimean developers can no longer put apps into the Play Store, but it’s hard to see how this could be allowed as the sanctions should nullify developer contracts and bar payments.

Russia blocks bitcoin websites over “shadow economy” fears

The Russian telecommunications regulator Roskomnadzor has blocked access to five bitcoin-related websites because the cryptocurrency “contributes to the growth of the shadow economy.”

The sites include Bitcoin.org, a primary community resource for the cryptocurrency that’s run by the Bitcoin Foundation, the Bitcoin.it community wiki, the Russian-language BTCsec.com security site, the London-incorporated Indacoin exchange, and Russian bitcoin community site Coinspot.ru — although the same service’s Coinspot.io address is not blocked, according to Roskomnadzor’s handy site-block checker.

Roskomnadzor has the power to order ISPs to restrict access to certain sites. Tuesday’s blockages stem from a court order dating back to September 30th last year, although they were only enforced today. In a blog post, the Coinspot.io team said no-one had contacted them directly about the court order, and they had no idea what the court in the city of Nevyansk, which issued the order, had to do with “cryptocurrency and the internet in general.”

An excerpt from the court’s decision posted late Tuesday on TJournal.ru read (according to Google Translate):

Introduction in Russia of other monetary units and production of money substitutes is prohibited. In such circumstances cryptocurrencies including ‘bitcoin’ are money substitutes, contribute to the growth of the shadow economy and can not be used by citizens and legal persons on the territory of the Russian Federation.

Legality issue

Bitcoin’s legal status in Russia is actually quite complicated. The authorities there said last February that it would be illegal to use it as a money substitute, highlighting its potential for criminal use by money-launderers and terrorists. In September, deputy finance minister Aleksey Moiseev said an outright ban may be instituted in 2015. Legislators have recently been talking about heavy fines for the use of cryptocurrencies.

However, the draft bill that would actually ban bitcoin in Russia was recently sent back for revisions by the Ministry of Economic Development, which complained that its definition of “money substitutes” was too general and could hamper corporate marketing programs.

Igor Chepkasov, the chairman of the Crypto Currencies Foundation of Russia, told Coindesk that he thought Tuesday’s blockages were “a dress rehearsal for the prohibition of bitcoin in Russia.” He urged enthusiasts to “unite and fight for their rights” and offered consulting and legal services to those affected.

Indacoin founder “Stan” (who did not want to give his full name) told me today that Indacoin’s hosting provider notified it beforehand that the blockage was imminent. He said his firm had already registered .net, .org and .io addresses, and these would go live in a few hours’ time. Stan, who is Russian, said the ban didn’t have a terrible effect on his business since only around 15-20 percent of Indacoin’s turnover came from the country (he said Indacoin’s turnover was around $1 million between May 2014, when the service began operations, and the end of the year.)

Stan said he thought the situation remained uncertain while the draft law remains under discussion. For that reason, he said, the court’s decision was inexplicable:

Bitcoin is not illegal here in Russia. It was not banned, so in fact they were not able to ban those websites. I guess they did it because they heard some buzz about regulations of bitcoin and bans of bitcoin, but they didn’t have deep insight into the situation.

The blockages are not comprehensive – for example, the Bulgarian site BTC-E, which does a fair amount of trade in ruble-bitcoin transactions, is not blocked in Russia. However, the targeting of the community resource sites in particular suggest that the authorities are trying to at least send a message. It may be relevant that the ruble is in a shaky position these days, thanks to sanctions related to Russia’s invasion of Ukraine, but then again bitcoin itself is less than a sure thing, having lost around half its value in 2014.

This article was updated at 8.55am PT to include and reflect the excerpt of the court’s decision.

Belarus blocks news and commerce websites over currency fears

Fearing a run on banks and shops due to a faltering currency, the authorities in Belarus have blocked several news and e-commerce websites, according to reports. The Belarusian state-controlled economy is closely linked with that of Russia, and the slide of the Russian ruble has spooked the Belarusian authorities, who introduced a 30 percent tax on foreign currency purchases. On Saturday, the authoritarian state reportedly blocked more than a dozen online stores that raised their prices or priced items in U.S. dollars, and also blocked several independent news websites without warning.

Apple shuts down its Russian web store due to ruble instability

If you head to Apple’s Russian-language online store right now, you’ll find that it’s not up — and Apple’s providing the usual “We’re busy updating the Apple store” message. But Apple’s not adding new products or working behind the scenes. As first reported by Bloomberg, Apple has pulled its online store in Russia because the ruble has been severely devalued today after teetering on the brink of instability for weeks. The online Apple store only launched in Russia last year and the country has no physical Apple Stores. If you’re a hoarder in Russia, look past the traditional gold and greenbacks as stores of value — iPhones could provide a nice return.

Update 3:25 ET: The run on Apple products has started.

Google to close down Russian engineering operations

Google is closing its Russian engineering office, according to a report in The Information.

Google’s Russian engineers will be offered jobs in other countries or in other departments, the Financial Times noted. The company is not saying why it is shutting its Moscow engineering office, which focuses on Chrome OS and the Chrome Web Store, but it said in a statement: “We are deeply committed to our Russian users and customers and we have a dedicated team in Russia working to support them.”

The move follows a series of new restrictions on internet activity in the country, ranging from requirements for popular bloggers to register themselves and abide by censorship limitations, to requirements for Wi-Fi hotspot users to log on with personal ID.

Perhaps most pertinently — unless the department’s shuttering is purely for business reasons — [company]Google[/company] has been ordered to store the data of its Russian users in Russian data centers, and also to comply with the bloggers register law. Russia’s security services have previously urged the use of locally developed encryption in the country’s data centers, suggesting that the move is tied to a desire to be able to access citizens’ personal information.