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15 Sep, 2008 08:28

Small business looks for government to free up red tape

In the major market economies small business is the key driver. In Russia however, it is all too often dependent on the optimism of individual entrepreneurs. But efforts are being taken to create the necessary infrastructure, cut red tape, remove tax hurd

Aron is an entrepreneur. His company of 50 employees produces toll and sliding anti-ram barriers. He launched the business three years ago taking a 230,000 dollar bank loan. Aron says about 25 per cent of that money was spent on bribes, another 18 per cent on taxes and about 40 per cent on salaries. That barely leaves him the money to pay the interest on the loan, not to mention the debt itself. However, he's struggling to save his business, waiting not for help but for a change.

“I believe the government's loud and impressive promises to support small businesses are sincere, but I do not believe they will have any real effect for us entrepreneurs. I wish the government simply stopped intervening and making it more difficult than it is already,”
The things aren't any easier for a slightly more common form of a free enterprise – trade. Daria Chiplygina runs a boutique in the city of Zelenograd in the Moscow region. She says the advertised accessible loans for small business were not available after all. She had to take a small individual loan to start up her business.

“For an enterprise to be granted a loan it has to be operating for at least 6 months otherwise banks see it as high risk,”

But if you're only starting up a business it is impossible to take a loan. Daria pays taxes using a simplified scheme which eases accounting, but doesn't give financial privileges. She also had to lie in the company's financial statements due to flaws in the law.

“During the first couple of months we had to show our profits in financial statements. However we did not make any profits we were running losses, naturally. So we had to hide some of our expenditures because losses in financial statements would call for inspections,”

Daria says if there was a proper start up scheme for small business she would have started making profits much sooner and she wouldn't have had to hide losses for so long and spend so much time dealing with the paper work.
The stories of Aron and Daria are typical, they face the same problems as many those starting their businesses in Russia. They are not asking for much help from the government, just that some of the bureaucratic barriers they face be lifted.