Entrepreneurship’s development in Russia: tendencies and difficulties.
For the previous twenty years Russian entrepreneurship overcame a significant way in its development.
Even ten years ago legislative base substantially delayed behind the evolution of the economic-organizing mechanisms in entrepreneurship, and it had an impact on investment climate, and companies’ behavior and directly on financial, industrial and social relations. Nowadays this economic lag significantly decreased. In a parallel way a liberalization of criminal legislation happens, possibilities of forcible takeovers of the companies are exscinded and mechanisms of customized deprivation of the owner from item of property.
In the process as usual in economy the balance of liberalization and government regulation is important. Everybody remember well, how did excessive government regulation fetter economy for many years. The harmful impact of absolute economic freedom of 90s is also remembered. Such experiments weren’t useless for a huge country. And the following results are important to notice.
Nowadays there is a certain system of economic relations that is regulated at the national level. Registration of companies of any forms of property isn’t difficult. There are three fiscal systems, two of which are simplified and concessional for entrepreneur. Given concessions get abroad on the companies of small and partially medium-sized business and allow working in simplified procedure of registration, accounting and tax accounting. There is a possibility of choosing payment of single tax on total turnover (6%) or difference of revenue and expenses (no more than 15%) if there is no VAT and tax on profit.
The possibility of registration as entrepreneur without legal person’s education with large remissions in providing final reporting is envisaged.
In this process a main document that regulates problems of taxation – Tax code of Russian Federation is represented as difficult, confusing and controversial document in many questions. And the system of tax authorities can be often hostile to business and follows plans of implementation of ‘successful’ testing events, not principles of favor.
For example, entrepreneurs face to such definition as cost in Tax code. It is known that cost is perceived in economy as definition of all outgoings that the company takes for producing and selling goods or service. But tax legislation understands cost in the other way, including only certain types of expenses, which will be decrease taxable base. The unique definition of what expenses must be in the cost and what expenses mustn’t is frequently nontrivial. Entrepreneurs often have to justify themselves in the court, spending a lot of time and money.
On the other hand, taxation, amount of taxes that must be paid in budget is enough appropriate. It is known that the level of taxation in the most of European countries is not lower than in Russia. Moreover, there are no simplified modes in Germany for example, and small business is taxed on the same rates as a big business.
The period of salaries those were given in the ‘envelope’ for 80-90% to go from excessive taxation on income of individuals, passed away.
The 35% tax that is already established for this income, allows entrepreneurs to show fund of wages openly. This forms pension fund and allows to take credits and have a credit record.
The Internet sector has an active development in economy. Of course, Russia significantly lags in this case and this lag from the USA, as trendsetter has its reason. However, much money is invested into this economy area. Russian projects approved their usefulness for the last years. As examples, there can be yandex.ru that had a success in IPO, vkontakte.ru – a Russian social network, that is originally created on facebook.com basis but then became a powerful independent project, that nowadays hasn’t any concessions in certain characteristics and metrics for ‘producing website’ , because of efforts of unique Russian developers and managers. The government is interested in development of Internet technologies: a part of government services slowly becomes online, electronic government is forming and virtual job vacancies are created.
Bureaucratic hints, of course, are noticed. All ideas are not realized and not even all officials have facile understanding of advantages and perspectives of ‘electronic’ development of economy. For example, development of Internet technologies helps to strengthen globalization. Many professions don’t require a frequently presence of man on work. The unique possibilities for people with disabilities are created. The distance learning is developed. Business incubators are created for entrepreneurs and special programs of developing grants to small business for interesting and worked projects within subjects of Russian Federation are also considered.
As Russian Government received ‘The strategy on innovative development of Russian Federation for period till 2020’ in 2011 (Resolution number 2227-p), there was such thesis about movement of economy for innovative socially oriented model of development as a sole possible method of achievement goals of lasting economical and social development of Russia.
Government policy in innovations is based on interaction of the public authorities, specialized federal and regional centers, educational system and business to development innovative capacity of the country in all ways.
For the previous ten years government organized a certain work to form national researching centers, to development of infrastructure of innovation’s supply, supply of making and development of innovative clusters. A row of government Councils and Commissions of modernization, innovative and technological development of the country’s economy was created (for example, Council with the President of Russian Federation for modernization of economy and innovative development of Russia – advisory body with the President of Russian Federation, that is organized to provide interaction of the federal public authorities of state power, bodies of state power of subjects of the Russian Federation, bodies of local self-government, social organizations, scientific and other communities for discussing questions associated with modernization of economy and innovative development of Russia)
However, entering planned level indicators of demand on innovation in real economy sector in 2013-2014 didn’t occur. Generally, it is associated with substantial decreasing of demand on innovation from real economy sector because of crisis events and reduction of budget payments of federal target program ‘Researching and elaborating development of scientific-technological complex of Russia for priority directions in 2007-2013’.
Government money for scientific-researching and experimental design works is spent not enough effectively in the most of economy sectors. The problem of scientific staff is not fully decided though the government attempted significantly to improve this situation.
The key problem is a low demand on innovations in economy of Russian Federation, and specificity of its structure: priority of ready equipment’s import instead of implementation of own innovative elaborations.
Government and private sectors don’t evince enough interest to elaboration and implementation of innovations. The level of activity of market agents in innovation’s implementation significantly concedes in this way in the leading countries of the world.
For example, perception of business structures to innovations of technological type is keeping low. In 2009 development and implementation of technological innovations were provided by 9,4 % of general quantity of Russian manufacturing’s companies, and this is significantly lower than meanings that can be for Germany (71,8 %), Belgium (53,6 %), Estonia (52,8 %), Finland (52,5 %) and Sweden (49,6 %). The share of companies, which invest to get new industrial technologies is 11, 8 % in common quantity of companies. The proportion of expanses for technological innovations in common amount of expanses to produce shipped goods, implementation of works, services of companies of industrial producing in Russia consists is 1,9 % (similar parameter in Sweden is 5,4 %, in Finland – 3,9 %, in Germany – 3,4 %).
The system of public-private partnership in the field of implementation of innovative projects in Russia is not developed enough. The share of receivers purposeful budget financing of the companies is 0, 8 % (for comparing: 8, 8 % in Germany, 12,7 % in Belgium). In 2011 valuation of amount of research’s programs of small business’s innovations and transfer of resulting technologies in USA supplied 2 billion dollars, in Russia equivalent valuation according to collaborative program of the Ministry of economic development and the Government of Russian Federation is 67 million dollars.
However, government creates a lot of innovative infrastructure’s objects. The technology-innovative special zones are working. There is innovative infrastructure that is formed in universities.
The system of self-regulation is developed actively. The federal law ‘About self-regulated companies’ that was received in 2007 became a first step to go to new system of economy’s regulation. Russian companies that are based on European and American skill got a chance for independent control of the market with appropriate level of competences and responsibility. Self-regulation has come as independent and initiative activity, that is doing by subjects of entrepreneurial and professional activity and consists of elaboration and setting of standards and rules of mentioned activity, and control of enforce of demands of these standards and rules. It already has its impact. For example, since 2010 all building companies and companies that work in planning and concordance don’t need licenses but they must be member of CPO.
Some functions of CPO:
Creation of own environment of subjects’ s membership in entrepreneurial or professional activity in CPO;
Possibility in using of disciplinary action’s methods in the case of own members;
Creation of arbitration courts to decide conflicts between members of CPO, and between them and users of all CPO’ s production (vacancies, services);
Analysis of own members’ s activity;
Providing of informational openness of own members’ s activity;
Implementation of control of own members in entrepreneurial or professional activity in the case of enforcing demands on standards and rules, environment of membership in CPO by them;
Possibility to challenge any acts and decisions of public and local authorities that violate rights and legitimate interests of CPO, or create the threat of such violation.
In can be noticed that decreasing of common level of government regulation in separate industries of economy. The periods of given licenses with simultaneous strengthen of controlling activity are increasing. It is one of the new initiatives and it is formed by overdue problems. For example, in 2010 there were 140 thousand of educational institutions in Russia and they all needed to get educational licenses. One time in 5 years they all had to pass expertise with compensation of expenses for its realization, to give certificates, information, justifications to supervisory instances. High educational professional institutions had to form near 250 documents with amount of 3 thousand sheets. Since 2011 given licenses became unlimited, and there was strengthen of sanctions for violation of licensing demands.
Control agencies reduce in their quantity, optimization and refusal of duplicate functions happen.
However, it is important to consider numerous difficulties, which faced by entrepreneurs. In general they associated with corruption and implemented corruption systems. The numerous cases of raider’s activity that is organized by criminal structures with supplying of corrupted officials. Illegal seizure of companies can’t be without help of government. This requires close interaction of criminals with tax inspection, law enforcement, bodies for combating economic crimes etc. The owner who faced this competent and well-organized system can lose everything he has. Even if juridical power is on his side, actives will be repeatedly sold in such way that final owner was out of reach.
The tax system’s imperfection made such phenomenon as ‘framing’ or ‘encashment’. Its essence is that the money is derived from company’s account through intermediary firms or companies to escape taxation and afterwards this money are ‘cashed out’. In 2000s this phenomenon had a mass character but soon it began to decline with implementation of preferential tax regimes.
Thus, it is important to pay particular attention to the following to save and strengthen further entrepreneurship’s development:
Salvation of special tax regimes for the further development of middle class. Existing systems of preferential taxation (simplified and taxation system as common tax on imputed income) helps development of small business. It is known that small business is the basis of economic development in developed countries. Its supplying is one of the priority tasks of government. We can think that these tax regimes are needed for using at least 10 years.
Simplification and optimization of tax legislation. The difficulty of Tax Code and existing of disputed legal norms in it leads to corruption and possibility of business pressure from fiscal bodies. The main tax document mustn’t allow discrepancies and ambiguous definitions.
Development of self-regulation institute. The main positive effect of self-regulation’s development is actually creating self-regulation communities that are ‘closely’ interested in cleanliness of its ranks and quality. These communities in the near future will be able to become replacements of large number of administrative and legal documents being highly effective and innovatively free.
Decrease of law enforcement system’s impact on business. It is important to limit possibilities of the Ministry of internal Affairs and prosecution service’s impact on entrepreneurship, strengthening a role and status of judges. All civil-law problems must be decided promptly and professionally in the courts. Modern system of legalized ‘protection’ and ‘problems’s decision’ by law enforcement must be destroyed.
List of the literature
Federal law: ‘About self-regulated organizations’ (changed on December, 3, 2011) from 01.12. 2007 № 315-FZ.// IPS ‘Code’.
Tax code of the Russian Federation (part two) from 05.08.2000 № 117-FZ.// IPS ‘Code’.