Ministry of Communications Cancels the Introduction of Software Sales Tax

2014-10-30 09:09:13

The government will not impose a 10% levy on sales of software products. The tax was initially intended to become the base for subsidies fund for domestic software developers. According to the head of the Ministry of Communications Nikolay Nikiforov, the idea was found to be ineffective. 

The government decided to abandon the tax, since it would inevitably lead to new challenges for business in the country. Current plans are to find other sources for the supply of the new fund, and to use currently existing mechanisms. However, the ministry still supports the idea of cancelling VAT exemptions on software products. As of today, the Ministry of Communications names the following areas of development that require funding support: development of database management systems, client-side operating systems, server-side operating systems, geographic information systems, and systems of documents and staff management. 

Earlier, RUBEZH magazine reported that Nikiforov voiced the idea of creating subsidy fund for software developers on September 20, 2014. The fund was to be formed by the fees from software sales. Subsidies were to be granted to the strongest domestic software developing companies able to create breakthrough products for Russian and foreign markets. At that time, development of virtualization system, mobile operating system and cloud technologies was the prioritized destination for investment. According to Nikiforov’s calculations, in order to develop 10 necessary software products, 20 thousand software engineers had to work for at least 10 years, which means that the cost of investment amounted to 200 billion dollars. A support package of 100-120 billion dollars over 10 years (10-12 billion a year) would have proven efficient. 

The idea was supported by the President, who added that the government must develop it further. However, Russian software developers heavily criticized the initiative. Yesterday, Association of Computer and Information Technology Enterprises (APKIT) published an open letter where import substitution measures for software products proposed by the Ministry of Communications were named "destructive".


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