The Russian Small and Medium-sized Business Forum: ‘Reducing Administrative Barriers to Business’
During the Second Russian SME Forum within the scope of SPIEF 2016, a panel session was held on ‘Reducing Administrative Barriers to Business’. The participants discussed the problems that arise for small and medium-sized businesses in applying regulatory and legal acts and also made proposals for cutting business costs.
The event was moderated by President of OPORA Russia Alexander Kalinin. He reminded those present about the importance of eliminating excessive and duplicating functions of controlling and supervisory bodies, as hindrances not only to conducting a functioning business but also to opening new nterprises.
“In January, at the OPORA Russia Forum, we proposed a simple form for easing the state controlling and supervising function by replacing a fine with a warning during the first audit. Importantly, we were supported by President Vladimir Putin. Today, imperative norms need to be introduced into the Code of Administrative Offences. Work on combating violations should be conducted primarily from the preventive perspective,” Alexander Kalinin noted.
Yet, as First Vice President of the All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses OPORA Russia Vladislav Korochkin noted, fulfilment of the President’s instructions is losing impetus and administrative costs are associated with anything but actually doing business.
Since 2014, there has been a gradual increase in the number of measures additionally encumbering enterprises. Businessmen have to pay for statements, equipment, analyses, and confirmation of security systems. In addition, according to Mr. Korochkin, corrupt money flows are being laundered through creation of commercial administrative processes. The administrative staff also manage to influence competition on the market: business is being localized and unneeded market players have to withdraw. At the same time, excessive regulation of the market syphons off profits from the real sector: the cost of administrative barriers for the economy amounts to up to 7% of GDP each year. As for the tax burden, it should promote growth of the real sector of the economy. At the moment, however, up to 60–75 kopecks of every 1 rouble earned goes on tax payments.
More detail was provided about the controlling and supervisory burden by Anastasia Alekhnovich, Head of the Expert Centre under the Presidential Business Ombudsman for the Protection of Entrepreneurs’ Rights. She stressed that the main thing was to reduce administrative pressure on business.
At the same time, Ms. Alekhnovich admitted that there has not yet been any success in reforming the controlling and supervisory bodies. At the moment, up to 70 different types of control are conducted at enterprises, though businesses see them as customary inspections.
Statistically, moderator Alexander Kalinin added, in the order of 35% of audits are conducts according to schedule, while the rest are unscheduled, whereas the statistics do not even include administrative investigations.
The participants in the panel session believe the main quality indicator of the work of supervisory bodies remains the amount collected in fines, and this certainly cannot reflect well on business. The types of supervision envisaged by Federal Law No. 294 remain, too. Anastasia Alekhnovich drew attention to the fact that a register should be drawn up of inspection and the statistics be furnished to business on all types of control and supervision. The Ombudsman’s office proposed halving the number of control and supervision measures, introducing personal liability of officials for errors, further expanding supervision holidays and terminating or better organizing administrative investigations, which also account for some of the audits. Moreover, in the opinion of Ms. Alekhnovich, businessmen have the right to know the requirements their enterprises should meet, so these requirements should be posted on the Internet.
As for legislative regulation, the situation in this sphere was commented on by Executive Director of the Forum Analytical Centre Alexander Bragin. He reminded those present that a road map had already been adopted for improving control and supervision activities in the Russian Federation in 2016–2017. The control and supervision measures should take place within the scope of prevention and audits become an extreme measure used only when there is a threat to an individual or society, Mr. Bragin mentioned as topics to be covered by the OPORA Rossii congress. At the spring session, the State Duma of the Russian Federation plans amendments to the Code of Administrative Offences replacing fines with warnings in the first instance. Subsequent legislative assignments will be followed through during the autumn session of the State Duma in consideration of comments submitted by business associations. These include amendments to Federal Law No. 294, which should be synchronised with the law on state and municipal control (supervision). From 2017, Rospotrebnadzor, the Emergency Ministry, and Rostrud will join in the legislative regulation, elaborating risk criteria.
The fact that certain results have already been achieved in the sphere of tax control was mentioned by Vladimir Gruzdev, Chairman of the Russian Young Entrepreneurs’ Alliance. In particular, businessmen work within the automated ASK NDS-2 system, which introduced a risk-orientated approach during control over VAT refund.
Dmitry Satin, Deputy Head of the Federal Tax Service of Russia, announced a reduction in field tax audits. In all the number had fallen by 15% in 2015 year-on-year and for small businesses by 30%. Measures had also been taken within the scope of specialised tax treatments: the rate for the income unit in the simplified taxation system might be reduced to 1% and 22 constituent entities of the Russian Federation had already passed such a decision. The general rate (‘incomes minus costs’) is 15%, which could be reduced to 5%, and 58 constituent entities of the Russian Federation are prepared to do so on a regional level.
Participants in the panel session noted that all the levers for speeding up the battle against administrative barriers should be found in conjunction with business associations, including improvement of the tax legislation, active legal support for businessmen and formation of a precise legislative framework for small businesses.
