Russian government could tax foreign film releases

Despite the fact the Russian box office in recent years has significantly increased, and for the first time exceeded $1bn in 2010, the share of domestic movies has declined, being estimated at no more than 15% in 2010.

In this regard, the Russian government is currently unhappy with the current state of affairs. Vladimir Putin [pictured], Russia’s prime minister, has been a lead supporter of the new charge, through his recent statements about the possibility of “introduction of an imputed tax on foreign products in the domestic film industry and the inefficiency of the current system of state support of the Russian film production.”

Currently, the government is considering how much distributors’ revenue from foreign films should be taxed. There is a possibility that it could amount up to 1.5%. Moreover there is a chance that a similar measure may be applied to the domestic releases.

All of the funds are expected to be transferred to the Russian State Film Fund.  

According to sources in the Russian government, there are plans to use the experience of other European countries, such as France, Israel and Poland, where the local film distributors are obliged to deduct a certain percentage of income received for the development of local film production.  

Unsurprisingly, most of Russia’s distributors have already expressed their upset with the planned new tax. Sam Klebanov, one of the leading Russian film producers, in an interview to the Russian RIA Novosti news agency, said that foreign films are already charged many fees, including VAT (at the rate of 18%), as well as customs fees, which are not applied to domestic films.

At the same time, according to state plans, most of the funds that will be raised from the new tax are expected to be invested in the digitalisation of the Russian cinemas. At present no more than 25% of them have transferred to digital exhibition.

The new tax is expected to come into force starting from June 1, 2011.