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. Last Updated: 07/27/2016

Independent Media in Tax Dispute With Government

Government officials who argue that any article about fashion or beauty products must be classified as a paid advertisement have handed the parent company of The Moscow Times a multi-million-dollar tax bill, company officials said Friday.

In addition to The Moscow Times, the Independent Media publishing house puts out several glossy magazines, including Cosmopolitan, Playboy, Men's Health and Good Housekeeping. Company CEO Derk Sauer said the Anti-Monopoly Ministry is now arguing that articles in these glossy magazines must be taxed as advertisements whenever they touch upon any commercial product - be it a dress or a book or a perfume.

On the basis of this interpretation, the ministry - which regulates the advertising market in Russia - argued during a tax audit in September that Cosmopolitan ought to be reclassified as an "advertising" magazine, and thus face a different taxation status. The ministry's ruling served as the basis for the lion's share of a $9 million tax claim against Independent Media.

Sauer said his company's position is simply that editorial content in a publication should not be classified as advertising.

Ministry officials declined to comment Friday but said they would comment next week.

Independent Media officials said they are negotiating with the ministry and hope to convince officials there to reconsider their position. Independent Media "still hopes it can solve the issue peacefully," Sauer said. Failing that, Sauer said, Independent Media would reluctantly take the matter to court.

"It is a classic case of how difficult it is to operate a company in Russia," Sauer said in an interview. "You try to behave according to the law and then [the government] tries to punish you."

Cosmopolitan is the first glossy magazine on the Russian market that has been judged under the Anti-Monopoly Ministry's new interpretation of the tax laws, Sauer said, adding that the dispute could therefore have "far-reaching repercussions for the Russian media market."