Russia publishes plan to tax foreign tech, promote home-grown rivals

FILE PHOTO: National flag flies over Russian government headquarters in Moscow
FILE PHOTO: A national flag flies over the Russian White House, headquarters of the federal government, in Moscow, Russia, April 22, 2016. REUTERS/Maxim Zmeyev

September 14, 2021

MOSCOW (Reuters) – The Russian government published a plan on Tuesday to impose new taxes on foreign-owned digital services by November, part of a package of proposals Moscow says are aimed at supporting its domestic tech sector.

The proposed tax on foreign tech firms has been presented as part of an international effort to agree new global tax rules to better capture revenues generated by big tech firms known for shifting profits to low-tax jurisdictions.

Deputy Finance Minister Alexei Sazanov said earlier this year that large foreign digital companies providing services in Russia should be subject to profit taxes, and that Moscow was involved in discussions with the Paris-based Organisation for Economic Cooperation and Development (OECD).

But in Russia’s case, the move also comes amid a wider effort to strengthen control of the internet and promote domestic alternatives to the services offered by Silicon Valley.

Russia has been seeking to force foreign firms to open offices on its territory and store Russians’ personal data there.

Other measures that already came into effect this year included a series of tax cuts for domestic IT firms. A subsequent law required smartphones, computers and other devices purchased in Russia to offer users pre-installed Russian software.

Tuesday’s package of additional measures seeks to increase demand for domestic technology and accelerate the digital transformation of parts of the economy, the government said in a statement.

(Reporting by Alexander Marrow; Editing by Peter Graff)