RUSSIAN GOVERNMENT TARGETS GLOSSIES
Byline: Natasha Singer
MOSCOW — The Russians have a whole new take on church and state.
A stringent new interpretation of the press taxation code by Moscow bureaucrats could cost the publishers of the Russian language edition of Cosmopolitan $9 million in retroactive taxes. That’s just for the year 1998.
And there could be costly implications for all fashion or lifestyle magazines publishing here.
The Committee on Anti-Monopolies and Support for Entrepreneurship of the Russian Federation recently presented Independent Media — publisher of the Russian Cosmo — with a multimillion-dollar bill, arguing that editorial pages concerning fashion, beauty, health and fitness should be classified as paid advertisements and taxed accordingly.
According to Vladimir Yromin, spokesman for the Anti-Monopoly Committee of the Russian Federation, “We determined that some of the material in Cosmopolitan, both photographs and text, were actually concealed advertising, not editorial. But the situation is complicated and in process. No final decision has been made yet. It’s too early as yet to predict the outcome or speculate on what impact it might have on other publications,” said Yromin.
Under the current Russian law on the taxation of mass media, there are three different toll brackets: newspapers, editorial magazines and advertising periodicals. The Russian statute stipulates that publications in which less than 40 percent of an issue’s total pages are advertisements are considered “editorial magazines” and are taxed at a lower rate than “advertising periodicals,” in which more than 40 percent of an issue’s total pages are devoted to ads. In addition to enjoying a different tax bracket, Russian-language editorial magazines printed abroad and brought into the country for sale are exempted from heavy import tariffs. Up until now, the Russian government has judged the major Russian glossies that adhered to the 40 percent ad rule — including Harper’s Bazaar, which prints in Holland; Vogue, which prints in Germany; and Elle, which prints in Finland — to be editorial.
However, the recent determination by bureaucrats auditing Cosmopolitan that any editorial page mentioning a commercial product be deemed an advertisement — whether a fashion item, a cosmetic or book — has the potential to reshape the entire Russian magazine landscape. Cosmopolitan is the first magazine in Russia to be levied with a fine, interest payments and back taxes under the new interpretation of the code.
Independent Media, which also publishes the Russian editions of Marie Claire, Good Housekeeping, Playboy and Harper’s Bazaar, is in talks with the federal committee hoping to mitigate the situation and head off a lawsuit. (Cosmo has a print run of 280,000 and an ad page costs $11,400; Good Housekeeping prints 210,000 copies and an ad page costs $8,200; the Marie Claire press run is 65,000 with ad pages at $6,200; Harper’s Bazaar’s press run is 55,000 copies and ad pages cost $5,900, and Vogue prints 150,000 copies with ad pages at $9,300.)
“They said that every time we write about a product or about the idea of a product, like the idea of using suntan lotion, it’s advertising. But that’s ridiculous and completely unacceptable. We don’t receive payment for running editorial. Our company’s position is simply that editorial content in a publication should not be considered advertising,” said Derk Sauer, chief executive officer of Independent Media.
“We have always operated with less than 40 percent advertising, and on the few occasions that Cosmo exceeded 40 percent advertising in one issue, we’ve paid higher taxes. We’ve always worked with the Moscow Committee on Anti-Monopolies and with the Press Committee of the Russian Federation, which issued us with documents confirming we publish editorial magazines. Two months ago, another governmental body showed up and claimed that we violated laws,” he added.
The confusing situation looks like a jurisdictional battle — with the state Press Committee and the Moscow anti-monopoly committee on one side, and on the other side, the federal anti-monopoly committee, egged on by tax collection authorities who want to beef up the nation’s coffers in the lead-up to December’s parliamentary elections and the presidential elections, scheduled for next year.
“In any other law-based society, one department of government can’t retroactively punish someone who’s been legally approved by another government department. I have to say it’s a bit scary for us. It also has far-reaching implications for the Russian media market in general. There are two fundamental legal and freedom-of-the-press issues at stake here,” Sauer pointed out.
Over at the Press Committee, officials agree that a freedom-of-the-press issue is at stake and worry that readers would ultimately be the ones to suffer most.
“If the Anti-Monopoly Committee’s decision stands, then all magazines will be classified as advertising periodicals, and then what reason would publishers have to run editorial at all for which they’re not paid? Readers won’t have anything left to read,” suggests Svetlana Ivanova, a specialist in the magazine licensing department.