Rossiiskaya gazeta
Central issue № 4895 dated April 23, 2009
Elena Kukol, Pierre Sidibe

Before arriving at the All-Russian Forum on Small and Medium-sized Enterprises organized by the Russian Economic development  Ministry, VEB and OPORA RUSSIA, Vladimir Putin approved measures for supporting business at a closed session. The next day the Premier had good news to share with the Forum’s participants.

But at first he explained the meaning of this variety of business for the state - “flexible, mobile, capable of adapting rapidly to changing market demands and being a large part of the Russian economy”. But most importantly, it is individual businessmen who, in the Premier’s opinion, form Russia’s massive and sustainable middle class. “It is obvious that in order to retain and boost this substantial potential we must provide you with substantial support, the Prime Minister was in no hurry to announce new measures. Before revealing all his anti-crisis cards, Putin reminded of increasing financial support for small enterprises – 30 billion rubles will be committed through Vnesheconombank and another 10.5 billion rubles - from the federal budget. Internal affairs agencies’ excessive powers were abolished and legislators also passed a law on the protection of legal entities’ and individual businessmen’s rights upon exercising state control which is to be put into effect not from July 1 as it was planned but from May 1 as  This initiative, by the way, was launched by Putin himself as he was delivering his report before the State Duma.

The first and one of the most effective measures that won the audience’s applause was a decision to grant a right to use a simplified taxation system to enterprises with incomes up to 60 million rubles. Now this simplified system is applicable only to an income of 30 million rubles. “There is no doubt that this measure is associated with certain budgetary losses of about 100 billion rubles. Moreover, there is a threat of business fragmentation. Nevertheless, we have to take this step”, said Vladimir Putin. The increased threshold, in his opinion, would compensate business for costs, which will arise since 2011 as a result of transferring from the uniform social tax to insurance premiums, with the rate to be increased to 34 percent from the current one of 26 percent.

Moreover, businessmen paying imputed tax will be allowed not to use cash registers. “Because in our country sometimes a cash register costs more than a product on sale”,  believes Putin  adding that we can defend consumers’ rights by using simpler equipment or writing a cheque by hand. The government and the State Duma will finish working on this draft law till July 1.

The Prime Minister called on speeding up work to place state auctions into electronic auctions and on reducing requirements for securing applications for small enterprises’ participation in them. Natural monopolies’ and state corporations’ standards for procurement activities would be reviewed substantially, with preferences being given to suppliers of Russian products”, the Premier sad.

At the same time, the Government will lease out premises that are not efficiently used by state unitary enterprises to companies at affordable rates. Having moved to new premises, businessmen will obtain preferential tariffs on having their equipment connected to electrical power lines. Under the regulation Putin signed a day before upon connecting a capacity of up to100kW businessmen are allowed to make only advance payment in the amount of 5% of the service value with a right to interest-free deferment for a period of 3 years. And connection is to be made within half a year.

By the way, this is not the last problem in the problem list. Perhaps, the main obstacle to the advancement of small enterprises remains to be poor availability of credit resources. The reason for this state of affairs from Mr. Putin’s point of view is the lack of the collateral base. That is why the govern- ment decided to commit 15 billion rubles in addition to 3.5 billion rubles committed before to replenish regional guarantee funds. In addition to the said funds 1.5 billion rubles will be committed to subsidize interest rates on credits to be extended to small enterprises. As a whole 20 thousand enterprises will be able to obtain credits up to 1 million rubles per each if they are covered by the microfinancing program. On top of all this, the authorities intend for the first time to extend grants or in Putin’s words – gratuitous subsidies to 15 thousand businessmen starting their own businesses – 300 thousand rubles per each businessman.

Vladimir Putin also stressed that high interest lending rates make small enterprises default on their debt payments. While there are no problems in the banking sector that can’t be addressed, the number of bad credits is sure to grow. So, the government would insist that interest rates should be reduced, especially by the banks that receive state support. And interest rates of 25% should be ruled out altogether. “In the long run we must create an integrated system of providing financial support for businessmen –from grants to bank credits”, Putin said promising to explore possibilities of introducing new tax reliefs for small enterprises in three years’ time. The audience applauded.

Details

Some measures for supporting small enterprises would be launched even earlier than planned. As early as on May 1 rather than on July 1 the law providing for inspecting small enterprises will be factually put into effect, promised First Deputy Premier Igor Shuvalov.

Almost all member of the government responsible for economic policies joined a dialogue with business yesterday at the All-Russian Forum on Small and Medium-Sized Enterprises. Many issues were addressed straight off. For example, representatives of small and medium-sized enterprises will be able now to be members of tender committees responsible for awarding state and municipal orders. Economic Development Minister Elvira Nabiullina and Federal Antimonopoly Service Head Igor Artemjev favored this proposal made by businessmen.

Such cooperation between business and authorities would reduce corruptibility and secretiveness in the operation of tender committees and increase businessmen’s chances to win orders. And a lot of money is at stake. By Nabiullina’s estimate, thanks to access to state and municipal orders small enterprises will be able to earn up to 1 trillion rubles.

The Law stipulates that small enterprises are to account for 20 percent of state and municipal orders.

And by Artemjev’s estimate small enterprises will be able to win 80 percent of such contracts. It is not improbable that as early as this year another regulation will be approved which will give small enterprises access to orders. Tenders for natural monopolies’ orders will be held like the ones for government procurements. The Economic Development Ministry’s Economic State Regulation Department Head Andrei Sharov believes that small enterprises would be able to earn another trillion rubles on these orders.

As far as inspections are concerned, under the Law inspectors are to visit small enterprises not more than once in three years and out of schedule inspections are to be carried out only with the prosecutor’s authorization. Business is looking forward to seeing this law become effective and it has overloaded the Prosecutor’s General Office with complaints about the excessive number of inspectors. So, the Prosecutor’s General Office decided on getting down to performing its functions on authorizing inspections as early as in May. Special working groups responsible for tracking down the situation have already been formed in the regions said First Deputy Prosecutor-General Alexandr Buxman. And he added that the Prosecutor’s Office would maintain a register of inspections starting next year.

We are bound to receive signals that the situation has improved for small enterprises in the coming months, Igor Shuvalov hopes.

And there is disciplinary punishment for negligent bureaucrats whose actions or inaction are detrimental to business. Officials will be simply disqualified and prohibition for a public office may be imposed for a period of several years, warned Mr. Shuvalov.

But the situation is not so bright. “Everybody wants to support small enterprises. But the situation is not developing the way we would like it to. Our wishes fail to transform into rapid development of small and medium-sized business” said Andrei Sharonov,a addressing these words to Presidential Aide Arkady Dvorkovich. In his turn, Mr. Dvorkovich singled out three obstacles that hinder the development of small enterprises

The first problem is that there are a lot of so called reference rules in applicable legislation. This means that there are laws, they are good laws but there are a great number of regulations, instructions which prevent laws from being put into effect to the full. The second problem is a response to signals sent by authorities. After the President had called on regulators not to give business nightmares the situation improved for a certain period of time. But after some time they appear to have forgotten this signal. Thirdly, we should create incentives for business to be motivated to grow and expand. At present, as soon as an enterprise grows to a certain level its tax base increases immediately. By the way the President has already ordered to work out a transition period and compensation measures for small enterprises operating under simplified taxation schemes, given that the uniform social tax is replaced with insurance payments, said Mr. Dvorkovich. And finally we have to exercise control over the implementation of decisions made. Here, we are already correcting mistakes. Just recently the President ordered to inspect executive authorities responsible for exercising control over business for corrupt links. Dvorkovich added that in the most immediate future proposals for optimizing regulatory authorities’ functions will be made so that they do not duplicate each other and hinder business.

But in any case if small enterprises are to develop they need money, businessmen said. This year the amount of support provided to small enterprises through Vnesheconombank has been increased threefold from the previous year to 30 billion rubles. So far, Vnesheconombank hasn’t received this money. But Vnesheconombank Chairman said that they were preparing a decision that would help businessmen. According to him, without waiting for this money to be transferred from the federal budget, VEB will turn for this money to the Central Bank. Mr. Dmitriev believes that businessmen will be able to obtain credits from these funds at a rate of 16-17 percent per annum. In total, the amount of support for small and medium-sized enterprises with VEB’s participation could be 100 billion rubles.

First Vice Premier Igor Shuvalov summed up the results of the Forum’s discussions. Recently, strenuous efforts have been made to support small and medium-sized enterprises and we shouldn’t lose the momentum. The government would exercise control over the implementation of the decisions made. And by tracking down the situation on a regular basis the government would identify next steps that have to be made to support business, Shuvalov promised.

We are going to carry on discussing taxes. But Shuvalov didn’t try to reassure businessmen with plans to reduce fiscal burden. In this respect our objective is on the one hand to create a more transparent and universal fiscal systeml and on the other to expand the list of activities to work on a patent basis. According to Mr. Shuvalov, in the long run we’ll have to move to such generally accepted in the world forms of supporting small business as subsidizing interest rates on credits and extending grants.

Elena Kukol