Tax on Google? To fund country's IT industry, Russia mulls new levy on foreign internet giants that use citizens' data to sell ads

Russia’s largest internet companies are teaming up with the country’s government to introduce a new tax to hit the pockets of their international competitors and funnel cash directly into the domestic market.

Representatives from Russian tech giants last week met with Deputy Prime Minister Dmitry Chernyshenko to help plan a levy on foreign internet giants that use citizens’ private data to sell targeted advertisements.

If it goes ahead, it will be another tax on top of the so-called ‘Google Tax’, passed in 2016, to target companies providing e-services, such as selling applications or video games without a physical store. This VAT brings the budget about 50 billion rubles ($67 million) a year.

In recent months, Russian authorities have taken aim at foreign social networks, with President Vladimir Putin slamming them for trying to make profit without care for whether content “causes harm.”

According to Moscow daily Vedomosti, representatives from the largest Russian internet giants, such as Yandex and Mail.ru, met with Chernyshenko to discuss extra tariffs on their international competition.

The proposed levy would target foreign internet companies like Google and Twitter, both of which use personal data to push targeted promotions. Commercials are the primary money-spinner for most online businesses. For example, in the third quarter of 2020 alone, YouTube made over $5 billion in advertising revenue.

“The new tax is a measure that is part of the second package of measures to support the industry. Its codename is the ‘Digital Tax,’” said one of the participants, speaking to Vedomosti. “It is supposed to charge an additional fee to a company that uses the data of Russians to form advertising policy.”

For example, the Vedomosti source noted that social networks often analyze user behavior for contextual advertising.

If the tax goes ahead, the funds will be directed to support the domestic IT industry.

In recent weeks, some Russian politicians have called for foreign platforms such as Facebook, Twitter, and Instagram to be blocked, with some accusing them of allowing illegal content, such as calls to join unsanctioned protests.

Senator Alexey Pushkov, an influential politician, noted his belief that it is necessary “to strengthen Russian legislation in order to stop the use of social networks mobilizing citizens for illegal actions.”

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