Liliya Kamysheva
Taxes on small businesses cut with hope for technology breakthrough
At a congress of the United Russia party, Prime Minister Vladimir Putin put forth his ideas for ways of surmounting the crisis for the nation's small businesses. "We must join efforts to create the most comfortable environment for entrepreneurs, to help those people who want to open their own business, but are still hesitant and doubtful, to make a positive decision. The federal measures will be much more effective if they are supported and developed in the regions. We must invite small and medium-sized enterprises (SMEs) to implement state and municipal orders, help them to get premises and connection to public utility networks, and also remove administrative barriers to business, including limited access to local markets," Mr Putin said. Judging by all signs, this is only the beginning.
Russian small businesses expect tangible tax cuts in 2009. "At present, a simplified tax scheme is used for small businesses, with a fixed tax rate of 15%. In order to reduce the fiscal burden on small businesses, I propose that the regions be given the right to reduce the tax rate by 10 percentage points, to 5%, and to differentiate it depending on the type of business and other objective indicators," Mr Putin said.
Experts from the Finance Ministry have estimated revenue shortfalls from tax cuts for small businesses, provided they are fully applied, at about 13 billion roubles ($464.3 million). Even such losses will not prevent the Government from additionally funding the national small business, however. The Prime Minister promised that financial assistance to small companies would be substantially increased even this year. The Russian Bank for Development alone will channel 30 billion roubles for this purpose, or 21 billion roubles more than planned. The federal budget will allocate 10.5 billion roubles, which means an additional 6.5 billion roubles.
According to Mr Putin, "all this money will be used to issue loans, subsidise interest payments, and provide state guarantees. They will also be used to develop SME infrastructure (technoparks, business incubators, etc.), to establish grants, and work out an ABC business course for beginners."
Mr Putin gave special attention to efforts to diminish the role of bureaucracy. "It is important to lift administrative barriers to business. The Government has already submitted respective proposals to the parliament, and I ask the deputies from our faction to think them over and expand the proposed measures, if need be," Mr Putin said.
Having no intention of putting his ideas on the back burner, the Prime Minister voiced them right away: "We must adopt the package of laws this very year. This will largely simplify the procedure for starting a new business and give an opportunity for entrepreneurs to work and create more jobs."
"The industrial sector needs support now, and therefore the new tax rules must take effect simultaneously, starting January 1 of next year," he added. His instructions to deputies were even more categorical: "I ask our deputies in the State Duma to endorse the necessary amendments to the Tax Code without delay, so that the new regulation may be applied within a week, starting November 28. This is important because November 28 is the tax payment day."
The deputies were quite enthusiastic when leaving the congress hall. Viktor Pleskachevsky, chairman of the State Duma property committee, said: "We were expecting an anti-crisis congress, but instead we heard a programme of economic development. This is rather encouraging."
Sergey Mironov, Speaker of the Federation Council, also saw real chances for promising long-term growth and development of Russian business, and, more importantly, production, in Mr Putin's speech. He told journalists: "We heard a practical programme of action aimed at stimulating production in Russia. This means that the state has made it clear that, upon taking urgent measures to support the financial sector and ensure its stable performance, its next priority is to create conditions for the growth and development of industrial sectors."
Apart from tax benefits aimed at directly stimulating all Russian businesses, Sergey Mironov pointed out an additional opportunity to renovate and modernise SME's production assets. He emphasized that the depreciation bonus would now be increased threefold, from 10% to 30%. In his opinion, entrepreneurs' long-term investments will now return to them much faster. This should serve as a weighty argument for the renovation and modernisation of production assets, the building of new industrial facilities and the renovation of computer equipment and software.
VAT cuts for exports may become the logical continuation of the policy to stimulate GDP growth by encouraging national producers. Mr Mironov believes that even this issue, which is very serious and sensitive for Russian exporters, may get moving. He has no doubt that both the Government and the business community will spare no efforts to boost production. "Crises begin in the financial sphere and the way out of them lies through renovation and higher production efficiency. Today we are taking the most serious steps in this direction in the past several years," Mr Mironov summed up.
Sometimes, good news from the Government concerning its plans to pay more attention to the business community is more important for businessmen than specific steps. Oleg Morozov, first vice speaker of the State Duma, said this when commenting on Mr Putin's speech: "This is a positive signal to business and I think tomorrow it will tell on both stock market and economic indicators. After these proposals, small, medium-size, and big businesses, as well as oil companies, about which Mr Putin spoke today, will feel that the Government cares about them, understands their problems and adopts decisions aimed at stabilising their economic situation," he said.
According to Mr Pleskachevsky, "small business is the basis of any country's economy, and is vital for citizens' employment. Real tax cuts will benefit the state much more than numerous unemployment offices maintained at its expense. People are more interested in earning their livelihood, especially when the state is interested in the effective operation of their businesses."
Mr Pleskachevsky emphasised that Mr Putin proposed the most effective and optimal plan of extricating the country out of the global financial crisis. "The first measure is target financing, which is being implemented now. The second one is stimulation of the economy through taxes. This is a long-term project, but it will be launched in the near future. It is important that the Government did not make any populist statements, but immediately started implementing its anti-crisis plans. Finally, the third measure is a substantial reduction in budget spending through effective long-term administrative reform.
