‘We have a tradition of double-entry bookkeeping’: small businesses asked to return to legal field
Tatarstan parliamentarians are concerned about disproportionately low business tax deductions
“We need some simple work schemes for outsourcing companies (accounting for entrepreneurs) that make (turnover of) small businesses transparent. Outsourcing accounting has long become the norm abroad, although, as I understand it, we have a tradition of double-entry bookkeeping," the parliamentarians reasoned at a morning meeting of the Committee on Economics, Investment and Entrepreneurship of the State Council. It was found that 41% of able-bodied Tatarstan citizens work in SMEs, but provide only a quarter of the annual income of the republic, which forced the commissioner for the protection of the rights of entrepreneurs, Farid Abdulganiev, to think about the problem. In turn, he proposed to “legalise” the concept of “family business” in the republic so that an entrepreneur could inherit his business.
Almost one in two went to work for hire in SMEs
Despite the economic cataclysms, entrepreneurship in the republic has managed to adapt to the changes in the global market and feels good. By the results of 2023, 174.8 thousand SMEs operate in the republic, which is the absolute maximum in recent years. This is by 4% more than last year, the structure of SMEs is still dominated by trade (38%), construction and logistics account for 10% each, manufacturing and scientific and technical activities account for 7% each. Farid Abdulganiev, the Commissioner for the Protection of the Rights of Entrepreneurs under the Rais, began the report with such a major note at a meeting of the Committee on Economy, Investment and Entrepreneurship of the State Council of the Republic of Tatarstan. So far, a preliminary hearing is underway on the results of work to protect the rights of entrepreneurs in 2023, after which the “pain points” of business are going to be put up for wide discussion in parliament.
The increased dynamics of SME growth was observed throughout the year. Referring to the data of the Ministry of Economy of the Republic of Tatarstan, Farid Abdulganiev said that the number of people employed in private business, including individual entrepreneurs, increased by 10.4% to 860 thousand people. They employ more than 41% of the total number of people employed in the republic's economy. At the same time, the number of self-employed jumped by almost 31%: over 306 thousand people by the end of 2023. The massive flow of the working-age population to SMEs led to a 10% increase in turnover, and their contribution to GRP increased from 22.6% to 24.1% (according to the Ministry of Economy of the Republic of Tatarstan), the commissioner for the protection of entrepreneurs' rights clarified. He did not name the absolute figures of the annual revenue of SMEs, but if we take into account that the GRP of Tatarstan amounted to about 4 trillion rubles, then the scale of SMEs is estimated at about 1 trillion rubles. “Based on this, we can conclude that a significant part of Tatarstan's business entities have adapted to the new economic realities," Farid Abdulganiev concluded.
If you don't have your own lawyer or accountant
What worries small and medium-sized businesses? In the first place in the ranking of requests is occupied not by business complaints against local authorities, but a lack of information and legal explanations. It turned out that entrepreneurs need legal support, since they have neither a lawyer nor an accountant, and they themselves 'flounder' in federal legislation. "28% of the requests concerned clarifications of legislation, including issues of execution of supply contracts, lease, use of land, illegal use of trademarks and conclusion of a leasing agreement," Farid Abdulganiev said. Another 8% of entrepreneurs asked for explanations regarding support measures.
However, although the number of complaints about the actions of the authorities is decreasing, these issues still remain in the top of relevant queries. Last year, they accounted for 23% of the total number. It has become noticeably easier for business to fulfill state contracts — there are 2 times fewer complaints, Farid Abdulganiev said.
Entrepreneurs want benefits for “family business”
The speaker also touched upon the topic of criminal prosecution of entrepreneurs, but outlined it in general strokes and without much pathos. According to Abdulganiev, he received 11 requests for protection. Businessmen are usually suspected of illegal entrepreneurship, but in general, the business environment in the republic is clean. “Tatarstan has the lowest value among all subjects of the Volga Federal District and one of the best indicators in Russia," the speaker noted. According to him, the commissioner's office has established close cooperation with the Prosecutor's Office of the Republic of Tatarstan, which helps to quickly “remove” conflict situations. But they don't leave 11 suspects either. “Behind each such appeal is the fate of an entrepreneur, his family members and employees of the company," Abdulganiev said.
In conclusion, he proposed to consolidate the concept of “family business” in the republican legislation. “The definition of a family business is not fixed at the federal level. For several years, the State Duma has been discussing amendments to the Federal Law “On the Development of Small and Medium-sized Enterprises in the Russian Federation”, which refers to family companies. Without waiting for them, the parliaments of the Kamchatka Territory, Nizhny Novgorod and Ryazan regions and Bashkortostan have consolidated the concept of “family business” in regional laws, which opens up the possibility of obtaining support measures," the speaker explained.
Small businesses are being prepared for “transparency”
In response, the parliamentarians decided to ask the commissioner why SMEs pay incomparably less taxes than big ones, whereas almost half of the working-age population of the republic works for them. “Look, 41% of those employed in small businesses. They produce less than a quarter of the gross product. This is an exceptionally low labor efficiency," said deputy, member of the committee Marat Galeev. He further blamed that there are “very few” high-tech companies in small businesses that would bring in large revenues. On the other hand, traditional business is not transparent. “In fact, it has long been the norm in developed countries to outsource accounting. Although I understand that there are traditions of “double-entry bookkeeping”. But the transparency of business in outsourcing is completely different," he noted. He proposed to introduce “some simple work schemes for outsourcing companies (for accounting for an entrepreneur) that will make [the turnover of] small businesses transparent and efficient.” "41% of those employed in SMEs provide only a quarter of GRP. This is a bright, but not a positive indicator," he concluded.
Deputy Speaker of the State Council Marat Akhmetov asked why the business stopped complaining about MSW. “Zero complaints. Are you tired, realising that it's useless?" he asked. The commissioner replied in the spirit that the appeals remain, but his office “does not stand aside”. But most of all, the vice speaker was surprised by the figure of 28%, indicating a weak awareness of business in matters of legislation. "28% is a lot and does not make better," he said. Abdulganiev explained the “phenomenon of legal illiteracy” by saying that Tatarstan businessmen need to be explained on their fingers. The information of the Delovorot telegram channel, where explanations are given in dry clerical language, is difficult for them to perceive, so the device writes them understandable “flowcharts” if it has done something wrong. “We understand that the entrepreneur has neither a lawyer nor an accountant. They need to bring the material in an accessible form," the commissioner explained. 400 flowcharts have been made in a year. As a result, they began to appear in neighbouring regions — they hang directly on (the doors of) stores," he was surprised at the speed of their spread in the Volga Federal District.
At the end, the parliamentarians approved the report, but there was no reaction to the introduction of a “family business”.