Small business is to get government support followed by government regulation.
Prime Minister Vladimir Putin has announced government-approved measures to support small and medium enterprises. The Government has approved tax breaks for SMEs, including a doubling (to 60 million roubles) of the annual turnover that makes an enterprise eligible for a simplified taxation scheme. More serious breaks have been turned down, and by 2012 the Government will be ready to consider lifting all the tax breaks.
Addressing a national forum on small and medium-sized business yesterday, Prime Minister Vladimir Putin handed out "gifts" to SMEs. The Prime Minister decided to follow the Government's "trend" to discuss small business and ways of supporting it (the sector unexpectedly came to top the agenda of government meetings in March).
However, no major promises have been given. The main measure was increasing the threshold of the annual returns that makes an enterprise eligible for the simplified taxation scheme, from 30 million to 60 million roubles. About 35% of small enterprises enjoy this preferential regime (55% pay tax on imputed income and 10% pay standard taxes).
The decision announced by the Prime Minister yesterday was the result of a compromise between a "bad cop and a good cop", namely, the Ministry of Economic Development and the Finance Ministry. The Ministry of Economic Development under Elvira Nabiullina, along with OPORA Rossii, proposed raising the bar to 100 million roubles, while the Finance Ministry in its Tax Policy Guidelines for 2010-2012 said that the threshold should not be increased at all.
Eventually a compromise was reached: The threshold was set at 60 million roubles, but it will not be adjusted annually for inflation. Announcing the doubling of the threshold, Vladimir Putin described it as "partial compensation of business costs" for the soaring social payments rates starting from 2011.
No more promises were given to small business regarding taxes. The Ministry of Economic Development, which is in charge of small business, had proposed far more drastic measures in its letter to Deputy Prime Minister Alexei Kudrin. For example, as a temporary anti-crisis measure it proposed that the regions be allowed to cut to zero the tax rate for the companies using the simplified taxation scheme. "We want small business to generate jobs and not to think about taxes," deputy Minister of Economic Development Stanislav Voskresensky said earlier.
The Finance Ministry rejected the idea calling this approach "unconstructive". The Prime Minister effectively agreed with that yesterday. Indeed, the gift to small businesses using the simplified tax scheme may be the last one. Mr Putin said that the Government would revisit the issue of SME taxes in three years' time, partly for the purpose of getting rid of "all sorts of opaque schemes". Elaborating that point, First Deputy Prime Minister Igor Shuvalov, who also spoke at the forum, said that special tax regimes might be abolished in the future. "It is necessary to form universal rules of taxation for all taxpayers and support individual groups through a system of grants and subsidies rather than special regimes," he said.
In addition to tax breaks, SMEs were promised accessible loans yesterday. The problem, which basically stems from the shortage of collateral, is to be addressed by "pumping up" regional guarantee funds. These funds have already received 3.5 billion roubles under the federal programme in support of entrepreneurship. On April 21, the Government decided to add another 15 billion roubles. In addition to guarantees, grants and microloans have been promised to start-up companies. In 2009, 15,000 such companies will get grants of 300,000 roubles and 20,000 will get grants of 1 million roubles. The Prime Minister reminded his audience that a 30 billion rouble VEB programme for crediting small business would be implemented in 2009.
Among the long-promised "gifts" is granting access to small and medium-sized enterprises to state and municipal orders through electronic auctions. Three such electronic auctions will start operating as pilot projects: under the Governments of Moscow and Tatarstan, and under Sberbank. The deposit on applications to take part in auctions for small enterprises is to be cut from 5% to 2% (that would save businesses about 24 billion roubles).
Finally, the Prime Minister said that he had signed a decree that week on streamlining the procedure for hooking up to power grids. For small and medium enterprises which use up to 100 kW a simplified and preferential procedure will be introduced: connection will take place within six months, with the company to make an advance down payment of 5% with the remaining sum to be paid interest-free in installments over three years.
The head of OPORA, Sergei Borisov, indicated that he had expected more from the Government. Above all, he wanted to see state-owned monopolies cut their tariffs. He said that the Government was taking back a large part of its aid to small business in the shape of the cost of licensing and maintenance of cash machines. "We have also learned how to count illegal charges," Mr Borisov said. OPORA's calculations showed that at present government officials collect up to 6% of returns in the shape of "administrative rent". The Government did not discuss abolishing that tax yesterday.
Alexander Visloguzov