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. Last Updated: 07/27/2016

Moscow Plans Hefty Tax on Its Name

The city of Moscow has plans to turn its name, emblems and architectural landmarks into lucrative trademarks -- and to make businesses pay for using them.


Under a law officials expect to be adopted by the city Duma within a month, companies will have to ante up if they want to use the words "Moscow" or "capital" -- or representations of city monuments -- for commercial purposes. It would apply to both Russian and English versions of the words and all derivatives.


"There will be a fee on the use of the city's name and symbols to protect its image," Anatoly Polibin, head of the city's information department, said Tuesday in an interview.


"There have been too many companies using the city's name in any way they like," added Polibin, who could not cite any examples of abuses.


The tax would be set at 0.5 percent of annual revenues for the companies affected, said Polibin, although he could not say how much money it would be likely to raise.


Potentially, it's a lot. Based on revenues of 1.6 trillion rubles for the first nine months of 1996, for example, the local telephone operator, Moscow City Telephone System, would have had to pay city hall $1.4 million.


The law would apply to companies manufacturing Moscow souvenirs or using the official Moscow logo -- a mounted warrior slaying a dragon -- in their production or name, Polibin said. Municipal organizations such as hospitals and charities will be exempt.


The daily Moskovsky Komsomolets, which in principle would fall under the tax, estimated the bill would affect more than 700 organizations operating in the city.


Legal experts said the measure -- akin to a recently revised federal government resolution that applies to the term Russia -- is rather absurd but probably falls within the law. Companies potentially affected were puzzled, since they have long used the capital's name and image without having to spend a kopek.


"Soon they will make us pay for the air we breathe," said a representative of Stolichny Bank, who gave his name as Sasha.


Scott Antel, an accountant at Arthur Andersen, said Russian law allows local administrations plenty of leeway in raising their own taxes. But he said that the city's initiative would be "pretty self-defeating," since "normally cities want to promote their name rather than discourage its use."Alexander Bychkov, a lawyer with Baker & McKenzie, said he didn't know of any other city in the world that levies such a tax. Another attorney, Anya Goldin of Latham & Watkins, said that in the United States the use of a city's name may be subject to close supervision, and even a fee.


Polibin said the tax law, currently in the final drafting stages among the city's administration, will spell out details such as which monuments could not be reproduced without being taxed. But he acknowledged that some questions would be open to different interpretations.


"It will be hard to determine which symbol belongs to Moscow and which ones [belong] to the Russian Federation," he said. "For example, I consider the White House, Red Square and the Kremlin to be Russian property -- but others here don't think the same."


For the companies at issue, the finer points aren't as irksome as the general principle.


"For seven years, we never paid anything," said Yury Davlatov, director of the Moscow Business Consulting firm. "And I don't think it's right we should have to pay for those companies which don't behave well."


The vice president of the Soyuzplodimport company, which owns the Stolichnaya and Moskovskaya vodka brand names, was also dismissive.


"For decades we have owned these brand names and I don't see why we should start now to have to pay for them," Alexander Kovalyov said. "This would mean that we would have to pay twice for such brand names, and I suspect it stands against existing federal laws."


In fact, a 1992 government resolution that was revised last December restricts the use of the words "Russia" and "Russian Federation" in the names of non-governmental institutions, including businesses.


Legal experts say such measures are a way for the government to protect itself against companies passing themselves off as official agencies. It's also a way to raise revenue.


Polibin said the new Moscow tax would supersede an old, rarely enforced law that requires companies using the word Moscow in their names to pay a tax of 12 times the minimum wage, or about 960,000 rubles.