Russian Culture Minister plans special tax on foreign movies

Vladimir Medinski, Russia’s Minister of Culture, has vowed to introduce VAT charges on foreign films shown in Russian cinemas. Earlier in the week, on June 22, Prime Minister Dmitry Medvedev ordered the government to explore and implement such a tax.

"It's completely incomprehensible, why should our tax system subsidize Hollywood? Furthermore, this measure will generate more funds for the Russian film industry and for the movie theaters that show them," Mediniski announced.

Dmitri Medvedev suggested introducing a tax on foreign movies during a meeting with film crews of the Russian movies Battle for Sevastopol and Territory. "We have to support our films, because they are made here, in Russia. There’s no reason why we should grant privileges to foreign products."

Aleksei Ryazantsev, director of a major Russian film company, warned in a note to Kommersant that the introduction of a VAT would inflate the price of movie tickets, leading cinemas to falsify tax reports about their revenue. He also predicted that the major American film studios would lose interest in the Russian market.

Aleksandr Luzhin, executive director of project Movie Research, noted that the tax would cause overall cinema attendance to fall. "Furthermore, it is those who watch less thrilling films that will stop visiting movie theatres—and these are mainly Russian films," he told Kommersant.

The Russian film box office in 2014 totalled 46 billion rubles ($837.2 million), 82% of which was generated by foreign films. VAT payments on this revenue last year (at 18%) would have cost theatres almost 7 billion rubles ($127.4 million).