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Imposing VAT on foreign films is against WTO regulations — Russian minister

July 30, 2015, 15:32 UTC+3 GORKI

Russia can support the national film distributors with traditional state support measures without imposing the VAT on tickets to foreign films

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© ITAR-TASS/Alexei Konstantinov

GORKI, July 30. /TASS/. Imposing the value-added tax (VAT) on foreign films is against the World Trade Organization regulations, Economic Development Minister Alexey Ulyukaev said Thursday.

He added that Russia can support the national film distributors with traditional state support measures without imposing the VAT on tickets to foreign films.

"Unfortunately, this solution to the problem of supporting the Russian filmmakers is against the regulations of the World Trade Organization. There is a specific article on the film industry. That’s why we need to find another solution," he told journalists, commenting on the initiative to impose VAT on tickets to foreign films.

"We are reviewing imposing the standard VAT for all types of films. And maybe introducing state support measures for Russian film makers - film producers and distributors," he told journalists, adding that it may be done "in forms familiar to all of us."

The Minister reminded that by order of the Russian Prime Minister Dmitry Medvedev the Russian Economic Development Ministry together with the Culture Ministry is studying the idea of repealing the VAT relief on film tickets. One of the possibilities was to repeal the VAT relief only for foreign films, but it contradicts the WTO regulations. That is why it was proposed to repeal the benefits for all the film producers, and to support the Russian film producers with state budgetary support measures. Ulyukaev could not say when the decision is going to be made. The Economic Development Ministry will present its proposals to the Russian government "as soon as possible."

As Kommersant newspaper reported July 30, the Economic Development Ministry replied to the request of the Russian Government to review the initiative on imposing the VAT on tickets for foreign movies. The newspaper cited the Ministry press secretary Elena Lashkina: "The Ministry found the decision is against Russia’s commitments taken upon joining the WTO." "Additionally, the positive effect from the measure is not apparent. It the measure came into force, Russian cinema theaters would have needed to pay the tax and would have been able to apply for a deduction of VAT paid, for example, by distributors," Lashkina said.

Prime Minister Dmitry Medvedev instructed to review the possibility of imposing the VAT on tickets to foreign films after the meeting with the production crews of the Russian films "Battle for Sevastopol" and "Territory" on June 22. "We should grant tax allowance to our films, but not necessarily to foreign films - this is obvious," the Prime Minister said at the time. "We need to look at the tax system, including the film tickets - in some ways it should be changed, in others - remain the same," he said. "And we could allocate additional funds from the tax to the development of our films," he added.

Medvedev instructed the Minister of Culture and the Economic Development Ministry "to review the question, including imposing the VAT on various production that could become one of the sources for future development."

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