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Russian Direct-Selling Agents Under Threat From Tax Increase

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Jan. 24 (Bloomberg) -- Up to a third of Russian direct-selling agents may quit their jobs because of a new law raising taxes on self-employed entrepreneurs, according to the head of the association that represents them.

The increase in the tax to 35,665 rubles ($1,187) a year from 17,208 rubles will be “unbearable” for many of the door-to-door sellers that represent companies such as Avon Products Inc., Tamara Shokareva, head of Russian direct-selling association, said at a conference in Moscow today.

The tax will be more than 50 percent of the sales of many of the students, pensioners and people searching for extra-incomes from direct-selling jobs, Shokareva said. About 4 million people are representatives of direct-selling companies in Russia, though not all of those are active, Shokareva said.

Avon, the world’s largest door-to-door cosmetics seller, may suffer as a result of the tax increase, Angela Cretu, general manager of Avon Russia, said in an interview.

Russia is a promising market for the New York-based company, generating about $1 billion sales in 2011, Cretu said.

“People here are much more inclined to have social gatherings that enable a channel like ours to gain traction,” she said. “Also, retail in Russia hasn’t yet expanded into the rural areas where direct-selling has a strong coverage.”

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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