Otherwise, cinema tickets that are already seen by the public as pricey will cost even more.
The letters to Putin and Grigory Ivliyev, chairman of the Duma Committee on Culture were sent on September 26; to Minister of Culture Alexander Avdeyev on September 27, to the Director of the Finance Ministry's Tax, Customs and Tariff Policy Department Ilya Trunin on September 20 (Kommersant has copies).
They mention the enforcement of Federal Law No. 235 of July 18, 2011 on amendments to the second part of the Tax Code to begin on October 1. These amendments extend the privilege of exemption from the VAT on tickets to "non-profit organisations involved in culture and arts." These include theatres, cinemas, circuses, libraries, museums, exhibitions, clubs, planetariums and parks, to name a few. Previously, all institutions of culture and arts enjoyed this privilege, for-profit organisations included.
The authors of the letters – Eduard Pichyugin, the chairman of the Board of Directors of KinoCity (15 cinemas) and its General Director Vladimir Goryunov asked the addressees "to recommend that the Finance Ministry clarify its policy regarding those who are liable for VAT taxes." In the past, the Federal Tax Service has been guided by Ministry of Culture's clarifications.
Vladimir Chikin, a partner at Goltsblat BLP agrees: "If we interpret literally the amended article 149 of the Tax Code, it appears that all cinemas are non-profit organisations. This substitution of notions will allow tax inspectors to interpret the amendments as they see fit. To avoid tax disputes, the cinemas need a policy clarification from the Ministry of Culture or the Finance Ministry."
Lyudmila Batalova, Head of Sameta Tax Practice, believes: "Non-profit organisations are a distinct institutional form of legal entity's incorporation. Thus, for-profit cinemas will not be entitled to this tax exemption anymore."
Sergei Kitin, the general director of the chain Cinema Park and Kinostar de Luxe (26 cinemas) knows about these letters and inquiries sent to the Ministry of Trade and Economic Development as well. He said the officials have not replied so far but made it clear, off the record, that they are willing to keep the cinemas happy.
Last evening, the press services of the Finance Ministry and the Ministry of Culture declined commenting on the issue.
"VAT will increase the cost of tickets, thereby reducing public access to cultural and educational opportunity... Modernisation of the film industry will slow down," the KinoCity letters read.
Quoting Movie Research on August 16, Kommersant reported that in the first half of this year the box-office take in Russia and the other CIS countries (except Ukraine) increased by 7.2% to reach 17.7 billion roubles over the same period in 2010. However, film attendance decreased by 4.9% -- to about 87.7 million visits to cinemas for same period. In other words, the increase in the box-office revenue was entirely due to higher ticket prices – during this period the average ticket price went up by 8% to 200 roubles. Movie Research General Director Oleg Ivanov summed up: "The audience already considers ticket prices to be too high and a further increase will only increase apathy."
Pavel Belavin, Sergei Sobolev and Anna Zanina