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. Last Updated: 07/27/2016

Profit Tax Forces Video Store to Close

Moscow's largest video rental store, Video Force at the Pizza Hut restaurant on Kutuzovsky Prospekt, is returning membership deposits to its customers after closing down, because a 70 percent tax made it unprofitable to stay open, according to the manager, Boris Paikin.


The Video Force store - one of three the U. S. -based company runs in Moscow - closed on June 14. Paikin said customers can claim their $50 deposits at the food store which has replaced the video rental service.


He said the shop, which opened three months ago, had offered the largest selection in Moscow of undubbed foreign-made videos in English, French, and German.


Video Force International, which owns a network of low-price video rental outlets in the United States, provided the tapes and equipment for the store, which was run by Pizza Hut.


The Pizza Hut store had almost 2, 000 titles and had attracted about 470 regular customers, 30 percent of whom were Russians, said its former manager Yelena Smagina.


The two other Video Force rental clubs are located at the Mezhdunarodnaya Hotel and on Oktyabrskaya Square. Video Force's sole competitor is the video section at the Garden Ring Supermarket, which has a smaller selection of 700 titles.


Video Force does not have a license allowing it to trade in Russia and has had to operate through locally registered partners, of which one was Pizza Hut.


Paikin said he was forced to close down the video outlet because the business could not survive a 70 percent profit tax imposed on video and audio-rental businesses by Moscow's tax authorities.


"We only found out about the tax rate six weeks ago when the auditors from the tax office came in", Paikin said.


Svetlana Lykova, the financial director for Video Force in Russia, said had Pizza Hut used different accounting procedures, the video outlet on Kutuzovsky Prospekt could have survived by reducing its tax bill.


Lykova said Video Force would request that the Moscow tax authority recalculate the charge imposed by the district office, but she did not expect the Pizza Hut branch to reopen.