Andrey Ageshin, a partner at ART DE LEX, gave a presentation at the "Issues of taxation for small and medium-sized businesses” roundtable

On 24 July 2015, the Liberal Club of United Russia held a roundtable on the theme “A Comfortable Legal Environment: Issues of taxation for small and medium-sized businesses” in Moscow. Vladimir Pligin, the chairman of the Duma Committee on Constitutional Legislation and State Building, Valery Fadeev, the chief editor of the magazine Expert, Boris Titov, a commissioner of the president of Russia for protecting the rights of entrepreneurs, and others spoke at the gathering.

Vladimir Pligin, the chairman of the Duma Committee on Constitutional Legislation and State Building and a coordinator of the Liberal Club of United Russia, said that the main task in developing small and medium-sized businesses is a deeper study of what incentive measures can exist in tax regulation. The deputy said that the Liberal Club constantly considers the problems of small and medium-sized businesses. “The number of small and medium-sized businesses in Russia is 5.6 million. These companies employ more than 17 million citizens in the working-age population. The share of this business is 21 percent of Russia’s GDP, and 54 percent of these entrepreneurs are engaged in trade,” according to Piligin. He added that Russia has taken many steps to develop small and medium-sized businesses. “It adopted a number of regulations that, despite the downturn in the economy, will have a stimulating effect on the development of small and medium-sized businesses.”

A partner of the ART DE LEX law firm, Andrey Ageshin, highlighted a number of issues relating to business taxation, in particular, he noted that the problem with individual taxation regimes is catastrophic. According to him, the nature of particular violations and the rigidity of certain tax penalties for violations do not correlate. Ageshin put forward proposals to improve legislation in this area, and he maintained that most changes should include a retroactive clause. “Because of these problems, business start to leave the market and go underground,” Ageshin said. “According to forecasts, 2015 will be one of the most challenging years,” he continued. “We cannot ignore those entrepreneurs who may leave the market this year. Today, there are many proposed initiatives aimed at removing unnecessary burdens to the entrepreneurs. It is necessary to implement them.”

Valery Fadeev, the chief editor of the magazine Expert and the director of the Institute for Public Planning, noted that the economic situation today is really “not brilliant.” He added that “the anticrisis program of the government is reasonable, but it does not look effective. There are lots of guesses about when the decline will stop. At the moment, the figures are alarming. We need structural reforms.”

Business Ombudsman Boris Titov, during the discussion about simplifying the tax regime for small and medium-sized businesses, proposed to streamline the registration process for self-employed people, for example, by limiting it to a simple application. However, there is a financial problem: the Ministry of Finance and the Pension Fund of the Russian Federation believe that a self-employed person should be registered in all the social funds and pay about RUB 20,000 annually. “People will not be able to pay such an amount,” the ombudsman said; therefore, there is a need for a “special decision of the state,” which, for example, will allow them to pay nothing or give them preferential rates. Titov emphasized that the main function of a small business is employment, not to create a source of income for the budget. All of the country’s small businesses pay three times fewer taxes than Gazprom.

Dmitry Orlov, the general director of the Agency for Political and Economic Communications (APEC), sees the formation of a broad coalition of like-minded people around a responsible policy as a solution. “There is a wide range of possibilities for responsible policy. The creation of bills aimed at tax optimization and bills concerned with improving civil society can be included in such a policy,” the analyst noted. The Liberal Club, in his opinion, could become one of the centers of the coalition. On correcting the tax regime, he suggested that the fees and certificates for the self-employed should not have a fiscal nature. In addition, according to Orlov, it is necessary to create a structure that would monitor the self-employed and entrepreneurs, track their payment of personal income tax, and encourage them to submit their tax declaration forms.

Vladimir Platonov, a deputy of the Moscow City Duma, stressed that the result of all these measures should help get business out of the shadows. “Business confidence in the state has acquired great importance.” The extensive advertising campaign urging people to “pay taxes and live calm” had no impression on the explosion of taxi drivers. “Only after legislative changes did they get out of the shadow. Any other business will get out of shadow if they have guarantees,” the deputy noted. Platonov said that such work is necessary. “In Moscow, there are about 1 million legal entities. Only 400,000 of them paid taxes. Where are the others? The situation must change.”

One of the major trends in the global economy is the development of a new wave of “transformative investments” that primarily affects the financing of small and medium-sized businesses. Related to this topic, the roundtable participants also discussed issues about corporate taxation in the area of public-private partnerships.