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Facebook joins foreign tech firms to pay Russian ‘Google tax’

Tue 11 Apr 2017

Russia has added social media giant Facebook to the list of tech companies registered to pay the so-called ‘Google tax’ with its Federal Tax Service, as a foreign firm selling digital content within the country.

According to local reports [Russian], starting from 25th April Facebook will be required to pay an 18% value added tax (VAT).

More than 100 foreign tech giants have already registered to the tax structure in Russia, including Google, Apple, Microsoft, LinkedIn, Netflix, Bloomberg and the Financial Times. English premier league football club Chelsea was also required to register due to its digital content distribution in the country.

A spokesperson noted that around half of all registered businesses sell software and video games, while 30% of firms distribute media content including music, videos and e-books. A further 15% are trading platforms and online booking services, with a handful of companies offering a search engine platform.

Approved by the Russian parliament in summer 2016, the tax came into force in January this year and is levied on providers of domain names, computer games, music, e-books, and other goods and services online.

The Russian government compares the new tax to the VAT paid by providers of internet services in the European Union, Japan, and South Korea. It predicts that the state budget will pull in up to ₽10 billion (approx. £141 million) from the new levy each year.

In an effort to respond to the new tax structure, some IT firms have raised the cost of their online services for Russian consumers. In 2016, Google increased the price of its Google Drive offerings by 18%.

Apple, however, has not pushed up its prices in Russia. Games developer Wargaming has also said that its Russian players won’t be affected by the new tax.

Having initially planned for its drivers to take the burden of the new tax individually, Uber has since reversed its policy following driver protests and has now agreed to pay the tax itself.

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