Can Russia cultivate a more substantial small business sector?
Simon12 September, 2008, 14:54
Living here and working for an overseas company it was necessary for me to register as self-employed with the tax authorities. Whilst the tax registration process was simple enough, and at a mere 6% on income received - certainly cheap enough! However, unfortunately, the same cannot be said for a well-known Russian bank with whom I recently opened a business account. Aside from copies of private contractual arrangements with my client, the bank demands I submit copies of every invoice I produce, so that they may identify the payee and the reason for income. Then a veritable mountain of paperwork to actually convert this income into Roubles so that I can withdraw money from a cash machine.
I was a one-man-band until starting work here, now I have to employ people to fill-in the paperwork!
Simpler rules,withdrawal on foreigners on opening accounts, nationals given encouragement to open small businesses, stop to 'raider regimes', tax benefits, boosts for housing, R & D spending, substantial depreciation breaks, lower VAT rates, direct tax collections being simplified, giving tax benefits for Companies encouraging population growth within their own employees are among other measures that could be introduced more vigorously and followed more regularly.
After all the SME's are the backbone of any Economy - Developed or developing.!
And all critical measures should be avoided in public as far as possible.implementation can be done privately or judiciously!
In Spain during the last decade small business has been led by franchises and I think promoting franchising in Russia will be a way to promote self-employment and business initiative.
There are hundreds of franchises in every field (from restaurants to pharmacy)
It took me three months to get through the bureacracy necessary to get going. As already commented, compliance with monthly VAT reporting and bank reconciliation are huge burdens compared to the UK. The Russian labour laws are also formidable.
Russian banking processes are the first barrier that should be tackled in order to improve small business start ups and reduce compliance costs. Like Simon I have a full time economist to deal with the paperwork for a firm of four people.
Import procedures are another nightmare. Russia has a low import penetration rate compared to the size and state of development of its economy (and thus higher prices for consumers and less competitive industrial structures). Bureacracy and lack of knowledge/transparency of procedures is a key reason. If something does go wrong then there is no way of finding out: if it has gone wrong; what has gone wrong; procedures for rectification; rights of appeal etc. etc. Transparency and accountability within the bureacracy needs improvement.
Enrique is right about franchises. Russian High Streets are already full of them because it is the only way to get reliable distribution.
Can Russia cultivate a more substantial small business sector ?
i am amazed by the question ...
it is not "if they can ..."
but more surely "THEY HAVE TO !"
any other choice would be suicidal ...
