Tax change threat to laundries and drycleaners

20 December 2018

RUSSIA

Leading Russian operators in the field of laundry and cleaning may bear serious losses in 2019, due to a recent decision of the state to raise property tax by almost 30% starting from next year, reports Eugene Gerden from Moscow.

According to operators, the new amendments to the Russian tax legislation will have an exceptionally negative effect on the domestic industry of laundry and cleaning services, as the already existing tax pressure on them brings them on the brink of losses.

Currently the majority of Russian drycleaners and laundries are located within the territory of shopping malls and other objects of commercial property, paying high rental rates.

It is expected, the raise of the property tax will force their landlords to increase these rates by at least 20-25% almost at once, which could make a further business of a significant part of laundry and dry cleaning operators in Russia unprofitable.

As a result, many of them will be forced to declare bankruptcy and to leave the domestic market, which just started to recover from the financial crisis and its consequences.

So far, some of the owners of commercial property, which are leased to dry cleaners, have announced their plans to raise prices, which sparked concerns from operators.

According to Dmitry Nesvetov, head of Diana, one of Russia’s leading networks, providing services in the field of drycleaning and laundry, the situation is considered as very complex. A further increase of prices will result in the outflow of customers, at a time when demand already remains low, due to the ongoing economical stagnation in Russia

Nesvetov said: “In order to stay afloat we will probably have to abandon our development plans. Unfortunately, we have little choice, because the price is not a category that can be changed by business, as taxes by the state.”

He also added as in the case of EU states, prices for laundry and drycleaning services in Russia are determined by a level of market demand, which, according to Nesvetov, at present remains very unstable.

 

 



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