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. Last Updated: 07/27/2016

Taxes, Air Fares, Wages Increased

Taxes, airline fares, interest rates and minimum wages are set to go up in Russia effective Thursday, and English-only advertising signs will have to come down.


Among the measures set to begin Thursday:


o Excise taxes on imported goods, such as alcohol, tobacco and automobiles, announced in December, will take full effect, adding between 10 percent and 90 percent to prices. Until now, most imported goods had been exempt, although similar Russian goods were subject to the tax.


o Fares for Aeroflot domestic flights will rise by one-third on average.


o Interest rates on most savings deposits will double.


o The minimum wage will double to 4, 275 rubles ($6. 25) a month.


o All foreign-language advertisements on billboards and posters will be required to also carry Russian texts, as will foreign-language store names.


The imposition of excise taxes on imports just two months after the 20 percent value added tax took effect on imported goods will make Western luxury goods even less affordable to Russians. The excise duty on beer is 25 percent, 50 percent on tobacco and 80 percent on hard liquor.


Cars carry a 25 percent excise duty. Dmitry Shuchko, sales manager of the FNC Ford dealership, said sales had already dropped since the VAT was imposed on imports in February. He added that he fears another decline this month. With 25 percent in import tax and another 20 percent in VAT, Shuchko said he does not expect to have much profit left.


Car buyers then have to pay another 20 percent to the state Road Fund, basically a road tax.


Aeroflot attributed the increase in air fares to skyrocketing fuel costs and airport fees.


A flight from Moscow to Vladivostok will now cost 51, 500 rubles, up from 36, 980 rubles, while a flight to Alma Ata will cost 24, 000 rubles, up from 9, 600 rubles. It is the second time this year Aeroflot has raised its fares. Hard-currency rates for foreigners, which are much higher, will not be raised, a spokeswoman said.


If that is not enough bad new for business in one day, Thursday is also the deadline for advertisers to add Russian texts to billboards that promote imported goods in foreign languages. Advertisements will have to carry a Russian translation in bigger logos than the foreign text.


According to Vladimir Malyshkov of the Moscow city consumer market department, companies that ignore the new rules may lose their license to operate in Moscow. If they promise to mend their ways, companies will get a two week reprieve - but will have to take their signs down in the meantime. When the measure was announced in February, officials threatened fines of 2, 000 to 20, 000 rubles.


Malyshkov said that advertisements in a foreign language showed a lack of respect for Russian culture, which is why Mayor Yury Luzhkov signed the decree on billboards.


Advertising companies BBDO Marketing, DMB&B and Ogilvy & Mather said they will not be affected by the new advertising rule because they have already been using Russian texts.


"It does not make much sense talking to Russians in English", said BBDO media director Nara Ter-Gabrielyan. Only brand names, if anything, are printed on the billboards in the original language, she said.


Some relief for Russians will come from higher interest rates on deposits and a higher minimum wage.


Trying to keep up with inflation, Russia's biggest savings bank will double its interest rate Thursday to 40 percent annually, and raise interest on one-year deposits to 100 percent from 60 percent.


With a monthly inflation rate of 25 percent expected for March and possibly even higher when inflationary spending by parliament takes effect, these interest rates are likely to do little to convince Russians to trust their savings to the bank.


The new minimum wage of 4, 275 rubles per month, approved by parliament last week, will be equal to the minimum pension, which was raised in February. While workers on the low end of the pay scale will remain well under the poverty level, the wage increase is also expected to boost inflation.