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. Last Updated: 07/27/2016

EDITORIAL: New Ad Tax Deductions Great for All

We are always sincere when we editorialize on an economic policy we believe would be good for the nation, but it's rarely personal. Usually it remains in the abstract realm of public policy debate.

Not so with the decree Mikhail Kasyanov promised to sign Monday to increase the expenses a company can write off for staff training, business entertainment and advertising. This is good public policy. But we will also be awaiting it with the eager anticipation of self-interest - as a small company that tries to pay good salaries on time and keep its nose clean, we would love to be able to write off some legitimate expenses.

As it is now, no matter how much a company spends on advertising, it can only deduct an amount equal to up to 2 percent of its overall revenues. This keeps many businesses from using advertising - anything spent on ads above that 2 percent mark is taxed (absurdly) as if that spent cash was still in the company's hands as profit.

This does not price advertising out of reach for, say, Coca-Cola or Proctor & Gamble. They surely do not like it, but they have deep enough pockets.

It does, however, price advertising out of reach of start-up businesses - foreign or otechestvenniye - and these are just the sort of businesses that most need advertising to succeed.

The current tax regime also, by the way, hamstrings the development of financially independent media - there's just not enough ad cash out there in this unfriendly environment to let a thousand newspapers bloom.

The Moscow Times is actually among the rare success stories here (yes, still). It was established back in the dark ages of 1992, when ad taxes weren't so draconian; today it lives off of advertising revenues (with some minor additional income from subscriptions and syndications) - mainly because when it comes to ad sales, the paper consistently tracks in market research surveys as one of the three or four most successful dailys in the nation - in any language.

But consider the experience of Vedomosti, our younger sister paper.

"Our newspaper is so far a money-loser yet it must pay a profit tax, because expenses on advertising and marketing [can't be deducted]," Vedomosti reported in an editorial Feb. 23. Vedomosti noted that these and other tax horrors force even honest businesses to divert their financial flows offshore.

"Frightened Americans think that money is being run through the Bank of New York by the Russian mafia," the editorial continued. "But these are just our businesses trying to survive."

- Matt Bivens