Russia Considering ‘Digital Tax’ on Google, Facebook: Finance Ministry

Global tech giants like Google, Facebook and Apple should bring revenue to the countries where they are doing business, the Russian Finance Ministry has announced, hinting the country could impose a planned “digital tax,” RBC reported.

The ministry proposes amending Russia’s tax legislation to make leading multinational tech companies pay taxes to those countries where their users reside. The measure would allow the avoidance of budget losses and would make tax distribution fairer, the ministry said in a recently published document on taxation policies for 2021-2022.

Tech majors currently exploit global tax loopholes by paying taxes to countries where their headquarters are registered, usually choosing low-tax states like Ireland. The country hosts the headquarters of the big tech companies such as Google, Facebook, and Microsoft, where they pay a 12.5 percent revenue tax.

However, in Russia, only local subsidiaries of those companies pay taxes. In 2017, Russia introduced a law requiring foreign firms to pay VAT for selling digital services in the country.

Leading multinational companies have been long under scrutiny in Europe, especially in France, which passed a law taxing tech giants, including Google and Facebook. The U.S. was unhappy with the move and launched a probe into the tax to determine whether it is “discriminatory or unreasonable and burdens or restricts United States commerce.”

The timing and details of the next proposals, which are expected to target corporation tax, have not been “worked out” according to government sources quoted by RBC.

“Currently it is just at the level of an idea,” KPMG partner Ilarion Lemetyuynen told The Moscow Times. “The tax authorities know that the current system doesn’t cover tech companies, they see the measures in the EU, and they believe they need to pay more attention to it, and potentially implement the same legislation in Russia.”