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. Last Updated: 07/27/2016

Media Fight for Tax Exemptions

Publishers are fighting what they say is a life-or-death battle for print media as they lobby over tax bills before the State Duma's budget committee.

With the law extending the media's tax breaks due to expire Dec. 31, the committee is looking into two bills -- one proposing to prolong the tax breaks for two more years, and the other proposing to strip media of their tax-exempt status and impose a reduced value-added tax of 10 percent.

Various media associations and publishers are lobbying to extend the tax breaks, but they face opposition from some media groups and lawmakers favoring a reduced tax instead.

Russian media have enjoyed an assortment of tax exemptions since 1995 under the law on state support for the mass media, which includes an exemption from paying the 20 percent value-added tax. The exemptions were first due to expire in 1998 but were extended after that year's financial crisis.

Budget committee head Alexander Zhukov said he favors the 10 percent VAT proposal, calling it a temporary measure to help the industry slowly adjust to the practice of paying taxes.

"The budget committee is considering the 10 percent rate for a transitional period," Zhukov said after a meeting with Alexander Lyubimov, head of the Russian Media Union and deputy general director of state-controlled ORT television, who proposed introducing the system for a year.

Vladimir Mamontov, editor of the tabloid Komsomolskaya Pravda, was cautious about the proposed new system after attending the meeting with Zhukov and Lyubimov.

"The transition to a civilized market must be carried out gradually to make sure the industry does not accidentally get killed during this transition," he said.

The proposed new system's opponents, who include the Journalists Union and the National Association of Publishers, said that for many regional publishers, it would mean dramatically reducing circulation and boosting prices in a bid to fight bankruptcy.

Journalists Union head Igor Yakovenko said the new system could bring about the end of independent print media, especially in the regions. Only a minority could rely on state subsidies from regional budgets.

"If this happens, regional authorities will be giving out state subsidies selectively and only to loyal media," Yakovenko told Interfax this week.

Alexei Voinov, a legal expert with the National Association of Publishers, said the industry was still recovering after the 1998 financial crisis, and extending the tax exemptions was the only way for most print media to survive. He said major newspapers' new tax-paying status would just mean wrapping up some minor projects, but for tiny regional newspapers, the result was almost guaranteed bankruptcy.

"We have analyzed both proposals and have come to the conclusion that print media are not prepared for the 10 percent tax now," Voinov said. "We would recommend preserving the existing system for now, targeting a 10 percent rate in future."

Zhukov said the possibility of including compensation for delivery costs to regional print media would be discussed during the second reading of the 2002 federal budget scheduled for Oct. 19, when deputies are to vote on which of the two proposed bills is preferable. The first parliamentary reading is set for Friday.