Titov proposed eight urgent measures to support small businesses in Russia

The share of small and medium-sized businesses in the Russian economy in the pandemic 2020 fell to the level of five years ago, the business ombudsman points out.Among the measures he proposes is the payment of downtime for employees at the expense of the budget in the event of a lockdown.

The share of small and medium-sized businesses (SMEs) in Russia's GDP in the pandemic 2020 is estimated at 19.8% against 20.8% in 2019. Such data are provided in the materials for the annual report of the business ombudsman Boris Titov to President Vladimir Putin (available from RBC). This share corresponds to the level of 2015, when SMEs accounted for 19.9% ​​in the country's economy. This is 2.5 times less than the average estimate of the share of the public sector in the Russian economy (50%), indicates the Commissioner for the Protection of the Rights of Entrepreneurs.

First Deputy Prime Minister Andrey Belousov spoke in an interview with RBC about the fact that it was small business that was at the epicenter of the coronacrisis. The economic consequences of covid-19 have become a difficult test for SMEs, Titov notes, adding that “at the same time, 2020 has become a positive point for cooperation between the state and business, for building a dialogue.” “Systemic changes are required in relations between business and government that can create favorable conditions for the development and recovery of business and the economy as a whole, in order to make SMEs the driver of the country's economic growth,” he believes.

Rapid action to support SMEs

After a sharp drop in demand in the SME sector in the second quarter of 2020, when strict anti-pandemic measures were in place, the situation improved in the third and fourth quarters due to cash subsidies to the population and the lifting of restrictions. However, this growth was exhausted by the end of 2020, in the first quarter of 2021 the situation of small and medium-sized businesses worsened again, and the drop in demand was 13%, follows from the growth index for SMEs, calculated by the office of the Commissioner together with the Institute for the Economics of Growth. Stolypin and Sberbank.

The majority of small and medium-sized entrepreneurs in the next 2-3 months plans to increase the cost of products (services) and abandon plans for business development, followed from the March survey of the FSO, the results of which are given in the report. Compared to a survey a year ago, the share of such entrepreneurs has increased significantly (an increase of about 1.5 times, follows from the graph in the report).

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To support small and medium-sized businesses, Titov suggests the following as urgent measures:

Preferential refinancing and restructuring of loans, leasing for affected SMEs (which lost more than 30% of revenue in 2020). Introduce a moratorium on the increase in the cadastral value for 2020-2022 in all regions. Extend the moratorium on inspections until 2022 inclusive. Easing restrictions on recruiting employees from neighboring countries. Compensate SMEs for the cost of antibody tests and PCR tests, expand the operation of mobile vaccination stations at enterprises. Extend compensatory measures for the purchase of personal protective equipment (PPE). In the event of a lockdown, vacation or long weekend, pay for downtime employees at the expense of the state - directly, bypassing the employer. Freeze utility tariff increases for SMEs until 2023.

What state support has already been provided

Last year, the authorities launched several programs to help small businesses, mainly aimed at industries affected by the CORONAVIRUS, including the Payroll 2.0 program, concessional loans at a low rate with the possibility of subsequent partial or full debt cancellation, depending on the preservation of the number of employees. In addition, moratoriums on inspections and bankruptcy were introduced. During SPIEF-2021, additional steps were announced to support small and medium-sized businesses: a pilot tax regime for public catering, easing antimonopoly regulation for small businesses, subsidizing the acquiring rate in the fast payment system, expanding the share of public procurement from SMEs, expanding guarantee mechanisms, lists Titov, adding that they were positively received by the business community.

Systemic problems of SMEs

Among the key problems of small and medium-sized businesses, the authors of the report to the President in the first place point to a high administrative burden: entrepreneurs find it difficult to navigate in too many articles on administrative offenses, their requirements are not ordered by industry, documents are written in a language incomprehensible to business, and KPIs of supervisory agencies are not designed to prevent incidents. As a result, the business goes into the shadows due to fines, the size of which is the same for SMEs and large businesses, according to the materials for the report. In addition, excessive reporting and document flow for SMEs require excessive paperwork: in the report, Titov notes that for 2019 there are 158 reporting forms for different types of activities.

Another important problem, according to Titov, is that the tax system is not balanced and forces entrepreneurs to engage in tax optimization instead of scaling their business. Small business does not transform over time into a medium business, its share in terms of revenue is, according to the report, only 3%, while small enterprises account for 18% of revenue. This is one of the key problems of Russian business, Titov notes: with the growth of business, there is no growth in profits due to the tax burden, but risks increase. Creating jobs is not profitable because of the system of payroll taxes.

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The SME representatives interviewed believe that in order to grow the economy, it is necessary to reduce the tax burden on enterprises and administrative pressure, limit the growth of tariffs and the tariffs for the services of infrastructure and raw materials monopolies, and stimulate demand, the report of the business ombudsman says.

It is necessary for the state to recognize that the development of SMEs is not a fiscal, but an important social function, a contribution to employment and to providing the population with affordable goods and services, Titov believes. In his opinion, it is necessary to change the approach of officials to small businesses - from the application of penalties to informing, training and, as a result, minimizing violations. The language of laws should be made understandable for entrepreneurs (increase their “readability”), and all innovations should be released in visual aids and infographics, testing them for perception before publication, the report says. The systems for considering applications in state bodies also need to be changed, eliminating complex bureaucratic procedures and speeding up the consideration of business requests.