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23 Apr, 2009 06:27

Government steps up to the plate for SME’s

Russia's small and mid-sized businesses will get up to $3 billion in help from the Government this year. Business owners say the state is moving in the right direction, but corruption remains a major hurdle.

Creating jobs and driving the economy forward. Small businesses are Russia’s hope for accelerating out of the crisis. The government has pledged its financial support to the sector, with Prime Minister Putin also looking to simplify taxation.

“Budget revenues will be lower this year, by at least 100 Billion Roubles. But despite this we have to allow small businesses whose revenues are less than 60 million Roubles per year to switch to a simplified tax regime.”

Putin also said small businesses could deduct loans from regional and the municipal governments from their taxable income.

However grateful small-business people are for this help, they say inspections and bribe extortion remain a problem, according to Natalia Manzhikova, Director, Ash Financial Consultants.

“Small businesses in Russia survive the crisis only because they are used to working under extreme pressure even in the pre-crisis times.”

Small businesses have to set aside a tenth of their income for paying bribes. That’s according to the All-Russian Small and Mid-Sized Business Forum. As a result, small businesses account for just 15% of Russia's gross domestic product, compared to over 60% in United States.

The solution? Redirect more of the tax paid by small business to regional and municipal governments, says Andrey Sharov from the Ministry of Economic Development:

“If we share even a small part of our tax revenues with the municipal governments, they would be motivated to support and protect small businesses.”

The state’s pro-active stance offers hope to small business owners, who say they are the KEY to getting Russia’s economy out of the crisis and making sure it remains competitive in the years to come.