Experts do not exclude higher prices for content in the App Store and iTunes due to a “Tax on Google”

The law, approved Thursday by the Federation Council and known as the “Google tax” aims to create equal conditions for Russian and foreign companies on the Internet. However, experts fear that it will lead to higher prices for digital content. Director of the Russian Association for electronic communications (RAEC) Sergei plugotarenko believes that most likely this will not happen. He stated this in an interview TASS.

“Tax on Google” will affect not only the work of software developers, but also to those who sell it. Among the largest developers and distributors of content under the law get “Yandex”, Mail.Ru 1C and SoftKey.

According to the law, foreign companies selling through Internet e-content in Russia, from 1 January 2017 will be required to pay the value added tax (VAT). They will need to register in a special electronic tax service and pay taxes on a par with Russian companies operating in the same market segment. Thus, the value added tax will be levied on the sale of e-books, images, music, audiovisual works, including granting remote access for viewing or listening via the Internet. Also, under the VAT gets selling software (including computer games), databases, including by providing remote access to them, including updates and additional options.

“This law will affect the activities of many companies, because the procedure of digital products differs from the procedure for physical goods – TASS said Plugotarenko. – Many domestic companies traded through the Western app stores or market places, and there is a risk that in this situation they will also be subject to taxation, even double”, — he explained.

At the same time, high competition in the regulated sector will allow companies to fully shift the VAT to the consumer,” said Director of RAEC. “Many solution providers, content are unprofitable companies that some investment projects, for example, online cinemas. For them the question is not about profit, for them it is about not losing market share, and as a result they will be forced to keep prices”, – said Plugotarenko. The press service of the TVzavr believes that the tax will not affect the online cinemas. “We pay VAT, we pay it”, – stressed in the company. Will not affect the law on the prices of media content.

With this position in General, I agree the Director RAEC. He believes that the price of digital content for end-users to grow should not. However, he stressed that “in fact the market will react – no one knows.”

Clifton Nichols

Clifton Nichols

Hi! I’m Clifton and I am a full-stack engineer with a passion for building performant and scalable applications that are beautiful and easy to use.

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