Translated material
Debriefing: Fund to help
The Ministry of Telecom and Mass Communications will try to support Russian software manufacturers by imposing a new tax on the industry
In mid-September, the head of the Ministry of Telecom and Mass Communications, Nikolai Nikiforov, made a proposal to create a trust fund in Russia to support domestic software manufacturers. According to the minister’s plan, the fund will be replenished by a new tax collected from all Russian and foreign companies selling software in the country.
On September 24, approved President Vladimir Putin the idea put forward by the official. TJournal tried to figure out what exactly the Ministry of Telecom and Mass Communications was offering, and whether the implementation of such a project could change the situation on the software market in Russia.
Everything is very bad
In a long interview for the Rossiya 24 TV channel, aired on September 20, Minister of Telecom and Mass Communications Nikolai Nikiforov was more frank than ever and assessed the current situation in the Russian IT industry as unsatisfactory.
On the one hand, a lot is being done to support the industry, the official said. For example, the number of budget places at faculties preparing IT specialists is regularly growing, and many existing benefits for companies working in the field of information technology are being maintained.
On the other hand, there is no need to say that in the short term domestic software manufacturers will be able to become competitive in the global market. According to Nikiforov, the main problem here is that the country lags behind in all key basic positions, presenting nothing in the segment of mobile operating systems, data management systems and in the field of office programs.
There is an opinion that the development of software products is a simple process, several students can do it, but if we talk about the industrial approach, about work for export, work in the corporate sector, then the labor intensity of such solutions is very high, it is comparable to development, for example , a modern aircraft. Nikolay Nikiforov
The reason for such frankness of Nikiforov, who spoke without fear on the air of a federal television channel about what, to a certain extent, is the result of a shortcoming of his department, was as follows: the head of the Ministry of Communications was preparing to present to journalists and television viewers his vision of how the situation can be radically turned around in this area - the target fund for support of software manufacturers.
Tax with meaning
The basic idea behind a trust fund is simple. It is proposed to collect a new tax from all companies - no matter Russian or foreign - involved in the sale of software in the country.
The tax rate should fluctuate. In the first few years, the fee may be as low as five percent, then increased to seven or even ten percent of the total turnover of the software sold.
If we take the example of a mobile operating system, which today is used by tens of millions of users on phones, smartphones, as they are now commonly called, then the labor intensity of such a product—about five thousand engineers—will take about five years to create it. And it can’t be done any easier. Therefore, companies need mechanisms that allow such developments to be carried out step by step over the long term, over five years, seven years. But for this, of course, we need sources and separate forms of support. Nikolay Nikiforov
On the scale of a year or two, the idea seems at least strange: to help Russian software producers by taxing them on the same basis as those who sell Western software. But Nikiforov suggests thinking with a ten-year perspective. During this time, such a tax would make it possible to create a huge, about 100-200 billion rubles, reserve of funds that could be used for the development of large-scale projects to create a “Russian Android” or a “Russian Microsoft Office.”
Nikolay Nikiforov
Not so clearly
At first glance, everything sounds a little socialist. The industry is actually offering to share part of the profits in order to help itself “give birth” to a competitive large project. However, as the Vedomosti newspaper found out , if you study the current situation in the IT market a little deeper, everything becomes not as clear as Nikiforov assures.
Some companies selling software in Russia operate on average at a profit of 20-25 percent of turnover. That is, a tax of 10 percent will automatically deprive them of not a tenth of their revenue, but half of all money.
At the same time, there are many companies in the industry that are just starting their own development. For them, a rate of five percent may still be feasible, but a 10 percent fee may even lead to serious losses.
As one of Vedomosti’s interlocutors assures, part of the contributions to the Ministry of Telecom and Mass Communications fund can be compensated by discounts received by companies selling foreign software in Russia under license from their suppliers. In this case, a 10 percent fee is still better than the alternative - a complete abolition of the current zero VAT rate on software licenses.
Like operators
In fact, everything that Nikolai Nikiforov proposes is based on an existing analogue in the development of a fiber-optic network in Russia. For the construction of new communications, the authorities created a special fund - the so-called universal communications service trust fund.
Contributions to it - 1.2 percent of total revenue - are paid by all Russian operators. Money is collected, consolidated and directed to the development of the fiber optic network and its “deployment” to new territories. In total, the fund's budget is about 15 billion rubles per year.
Such a system is, in principle, clear and transparent: companies share profits, in return receiving new communications and an increase in market volumes and the industry as a whole.
In contrast to this scheme, what software producers will pay a 10 percent tax for is still unclear.
We have identified about 10 of the most critical types of software products. Their development may require the efforts of up to 20 thousand software engineers. We need to look at the needs of the market, but these targeted funds [can] be used to support Russian companies that can do such developments, who have proven themselves not in word but in deed and already have a certain export potential. Nikolay Nikiforov
Which companies will be included in the list of fund recipients? Who will initially determine who receives the funds? And what if one of the companies eventually manages to create a product that really stands out on the world market? Will the companies that have been paying for its creation out of their own pockets be able to get a share of the profits all these years?
The Ministry of Telecom and Mass Communications, apparently, does not yet have answers to all these questions.
Sources of financing for the Russian Software Support Fund have not yet been determined, but they certainly will not infringe on the interests of Russian developers
— Nikolay Nikiforov (@nnikiforov) September 24, 2014
As President Putin emphasized in a conversation with the head of the department, he really supports the idea of the fund, but it still needs to be properly discussed and worked out with the Ministry of Finance and the Ministry of Economic Development. At the time of writing, there were no plans to discuss the issue with those who would have to pay this tax, if introduced.
And he realized that the fund was good and he created another fund,
Victor Stepanov,
TJournal
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