Russian Legislators Propose a Tax On Foreign Names

October 4, 2013
Фото: ИЗВЕСТИЯ/Марат Абулхатин

Nationalism and patriotism are rampant in Russia. The Interpreter has been following many stories that indicate that this sentiment is often manifested in unhealthy policies. Russia has threatened its neighbors for wanting to join the European Union, it has used immigration law as retribution for disloyalty, and it has used pogroms to crack down on ethnic minorities. Generally speaking, Russian social and economic policies have further isolated it from the European Union and the West in general, and its trade protectionism has alienated it from the World Trade Organization.

Now, a prominent Russian lawmaker wants to place a tax on any products, made inside Russia or imported, that carry a non-Russian name. – Ed.

The State Duma has prepared a draft law that would require producers of goods with foreign names to pay additional taxes. The tax is not expected to be too high, but considering the taste of domestic producers for foreign names, revenues can be quite substantial.

Yevgeni Fedorov, the author of the legislative initiative, said that domestic businesses in almost all areas, ranging from food items to the names of major IT companies and garment manufacturers , use foreign names in order to attract the customer.

Studies show that since the Soviet times consumers are easier sold on products with foreign, rather than domestic, names. Few Russian consumer would be willing to buy clothes under the brand of a knitting factory from a provincial Russian town, but they would with great pleasure buy clothes made by the same provincial knitting factory, but with an Italian or French name. Even if the foreign component of a product doesn’t go beyond the name.

In the lower house of parliament, they are not happy with the use of foreign words.

“Now we are working on this bill, that according to our plans will introduce tax on Russian companies using foreign words in the names of their products, Fedorov told Izvestia. The tax itself will be a symbolic 1% or just fractions of a percent. But it will indicate the preferences enjoyed by our companies, able to find suitable Russian words to name their products.

Currently the deputy is trying to decide what kind of scheme should be used to collect the tax. It could be taxation of profits or some other other option.

According to Fedorov, there is a clear definition of Russian words, as distinct from foreign. However the legislator could not give a clear answer about whether a brand like Yandex (shortened version of “yet another indexer”), should be considered a foreign brand name.

The business community is quite negative about Fedorov’s idea about taxing names that sound foreign.

The head of the board of trustees of Russian public organization “Opora Rossii,” Sergei Borisov, criticized the idea of ​​the drafted bill.

“These are discriminatory measures that nobody needs. One needs to understand the current processes of integration in the world and should not forget that we are part of the WTO. Therefore, these suggestions can negatively affect the investment climate in the country and the development of our companies,” said Borisov. “On the contrary, we need to make sure our companies have access to international markets and are economically intertwined with the foreign companies.”

Vladlen Maksimov, the Chairman of the “Liberty League,” the trade union of entrepreneurs, believes that the proposed measure will not work.

“We know that our legislators think a lot about patriotism, but in this case it should not interfere with business. The initiative itself will do nothing good, but nothing bad, either,” said the union leader. “About 8-9 years ago a similar issue came up. They tried to decide what to consider Russian names as opposed to foreign, but in the end no decision was made.”

In this case, if the bill passes, businesses will have no choice but to abide by it. And they promise not to raise prices to cover possible losses from the additional taxes.

“Of course, if such a draft becomes a law and a new tax is introduced, we will abide,” said Andrey Fedorin, representing the Ginza Project holding, that includes several restaurant chains. “Speaking about our services getting more expensive as the result of such innovations, I do not see any reason to change the prices.”

Yevgeni Fedorov promised to introduce the to the State Duma before the end of the year.