The Ministry of Digital Development Contemplates Levying Russian Businesses for Using Foreign Software

Special Levy for Foreign Software Use Amongst Russian Companies

The Russian Ministry of Digital Development, Communications and Mass Media is contemplating the introduction of ‘motivational’ charges. This is targeted towards Russian firms ongoing use of foreign software. This move was publicized on May 28 by Minister Maksut Shadaev during his keynote speech at the TAdviser SummIT conference, according to “Izvestia”.

Addressing an Unlevel Playing Field

Minister Maksut Shadaev stated this proposed levy is designed to ‘level’ the playing field between foreign and domestic software within the Russian market. Given that numerous Russian software users have discovered ways to get around the existing sanction restrictions, installing or updating foreign software themselves, one motivation measure brought forward is tax encouragement for companies to switch to Russian alternatives.

New Initiatives on the Horizon

In addition to this proposition, the Digital Development Minister also announced they are currently drafting a digital code – a document intended to serve as a compilation of all regulatory standards that govern digitalisation. He expressed optimism that the document will be ready by mid-2025.

Previous Remarks on Import Substitution

Prior to this, on May 21, the Russian Prime Minister Mikhail Mishustin declared in a government meeting that currently, the import substitution level for basic software in Russia is hovering at around 50%. He emphasized the indispensability of state bodies and commercial organizations transitioning to domestically developed solutions, especially considering the current geopolitical climate. However, he stressed that the predominant factor when considering alternatives should be their reliability.

Rapid Growth in Domestic IT Industry

Even earlier, on April 17, Maksut Shadaev reported significant growth within the domestic IT industry over the past few years. According to his findings, since 2018, the volume of Russian software implementation has surged 2.5 times, whilst the number of people employed in IT companies has increased by 50%. This indicates the Russian government’s consistent import substitution strategy within the IT sphere, including exploring diverse economic stimuli to secure the transition of state and commercial organizations from foreign products to Russian alternatives.

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