President of Russia Vladimir Putin: Good afternoon, Mr Titov. Have you brought your annual report?
Commissioner for Entrepreneurs’ Rights Boris Titov: Yes, Mr President. Time flies. We are completing the first five-year period in our work. Five years ago, you made a decision to entrust a very responsible and difficult but also a very interesting job to me and my team. Today we are reaping the first fruit, even if not very big ones, of our work.
The report I will present today shows that our institution has become fully established in all Russian regions. There are commissioners for entrepreneurs’ rights in all 85 regions. We have created a large public support team composed of public commissioners specialising in different areas, such as taxation, criminal law and other areas of expertise.
In addition, we have public representatives at municipal authorities. Overall, we have over 2,000 local representatives. We are working to respond to businesspeople’s requests and also on systemic issues of concern to business. We are submitting our annual report; I believe it is the fourth one. Here it is.
Vladimir Putin: Thank you.
Boris Titov: As usual, this report is based on the results of a comprehensive analysis. We have conducted over a hundred of the so-called situation analyses, that is, analyses of the situation in more than 30 areas in the regions and in Moscow. Over 2,000 experts and entrepreneurs contributed to this report. We also received support from our business associations, such as the Russian Union of Industrialists and Entrepreneurs, the Chamber of Commerce and Industry, Delovaya Rossiya and OPORA Russia. They have been involved in this work from the very beginning.
The report features 267 initiatives covering issues ranging from minor to prominent ones that are all relevant today for businesses, and outlines possible solutions.
I have to say that criminal prosecution probably remains the key issue. As you said during your 2016 Address, criminal cases are being opened to pressure businesses without leading anywhere. Just 15 percent of cases are brought to court.
These figures have now somewhat stabilised. Things seem to be changing, albeit tentatively. In fact, 2016 was the first year when the number of criminal cases that were opened on economic charges did not increase. Moreover, the number of entrepreneurs in pre-trial detention dropped by 24 percent, and you know that detaining an entrepreneur during a pre-trial investigation is illegal. Although some entrepreneurs are still facing pre-trial detention, and there are quite a few cases of this kind, the overall situation seems to be improving.
We would very much like not to lose this momentum and ensure that the trend is not reversed by consolidating these advances. The law could be amended to make it a thing of the past. This is the first thing we wanted to ask, and it is related to Article 108.
Unfortunately, there are still many entrepreneurs facing pre-trial detention. Some say this is needed for an investigation to move forward, but unfortunately it is not uncommon that an investigation stalls and sometimes the investigators even fail to show up.
We have started to work with the Prosecutor’s Office, and have reviewed many cases in order to understand whether decisions to put entrepreneurs in pre-trial detention have been legal. There are quite a few cases of this kind right now. For this reason, we would like to ask you to instruct the Prosecutor’s Office to continue working with the office of the Presidential Commissioner for Entrepreneurs’ Rights.
In addition to that, there are many administrative issues that we have uncovered. The report focuses on several major areas – specifically, the growing cost of infrastructure monopolies’ services. Unfortunately, we see a continuous growth there. At some point, the rates were stabilised as per your decision and frozen for one year. But, unfortunately, now the rates are growing rather fast, especially energy prices. I would like to discuss this in more detail. There are some clarifications in the report.
We are seriously concerned about banks’ bankruptcies as well as about entrepreneurs losing their accounts. A draft law is being developed on deposit insurance that will at least cover small businesses. We want to support it.
As concerns the default in payments to suppliers on behalf of the state and state companies, we are cooperating closely with the Prosecutor’s Office. In the past months, we have been able to repay almost 70 billion rubles of debt. Unfortunately, the remaining figure is still high and we keep working on this.
Another serious issue is the increase in the amount of accountancy paperwork. These days, even a small company must fill in dozens of forms. Unfortunately, it is not only the Federal Service for National Statistics but all federal agencies that are expanding the scale of accounting. Every agency has its own forms and what is particularly disturbing is that along with more red tape come fines. Fines under the Code of Administrative Offences have been increased and a small error in reporting can now result in a half-a-million fine.
Demolition of mobile retail outlets is another issue. One of the current incidents is, for example, a difficult situation in Krasnoyarsk, where almost 500 entrepreneurs may lose their places of business. I understand that a certain amount of work needs to be completed in the run-up to the Universiade but this problem must be solved. Perhaps, we should introduce compensation.
The self-employed are a concern for us. Their status has not yet been determined. You instructed us to straighten out the legal status of the self-employed but it has not yet been determined.
Vladimir Putin: What is the problem?
Boris Titov: The problem is that we suggested that the self-employed be considered entrepreneurs.
Vladimir Putin: But there was a decision on this issue.
Boris Titov: There was a decision to consider them just citizens. Not the way it was suggested initially. As a result, 40 people out of millions of self-employed have registered as of today (the law has been in force for three months now).
Vladimir Putin: Yes, this has already become regular practice.
Boris Titov: The problem is that these are simply citizens that must undergo registration. They will be relieved from the personal income tax only for two years. They have a tax break for two years. Their status is not linked to results. In other words, they have shown how they are making money and in two years they will have to pay taxes in full.
The legal status issue is also very complicated. We said that practically from 20 to 30 percent of the Civil Code will have to be rewritten because this is a completely new status in our legislation – “self-employed citizen.” If this self-employed citizen is an individual entrepreneur, he or she is listed as the latter. So this is a problem that we will still need to resolve.
We also have problems on the roads. There is an automated system of weight and dimension control. It is causing technical problems. There are many fines although this is an up-to-date technology. We are asking for a trial period because now that this system is being adjusted there are too many different problems.
The same applies to the electronic veterinary certification. This is a very serious burden on business but for the time being the performance of the Mercury system calls for improvement.
Vladimir Putin: Do you think this system is working well on the whole?
Boris Titov: We must have it but it should be adjusted. Some time must be spent on its tuning.
The situation with cash register equipment has improved although there have been many disputes, and businesses have had many difficulties with the cost of the machines and their availability. Step by step, the issue is being resolved. We set up a special unit in cooperation with the Federal Taxation Service across the regions. We are monitoring the prices, the availability and installation of the equipment, and whether there is an internet connection. I think by July the problem will be resolved. Then the second stage will begin that concerns individual entrepreneurs who did not have the equipment before.
Another issue that persists in Moscow is the cost of real estate and the increasing property tax for individuals and companies.
All these issues are included in our report. I would like to ask you to instruct the Government to analyse the report. Although, I must point out that developing the report involved several government agencies that participated in our case studies. However, according to the procedure that has been in place for years, the Government must establish a special working group to fulfil your instructions and report on the outcome.
Vladimir Putin: I will do this. But first I must review the report myself and issue instructions regarding it.
Mr Titov, you have been doing this work for several years. You basically created this system, this institution, along with your assistants. Even based on the list of problems that entrepreneurs deal with these days and which you look into, I can see that this work is necessary.
Your term in office ends at the end of June. I see your great interest in this job and your enthusiasm. I think it would be expedient to offer you an extension, which I am pleased to do.
Boris Titov: Thank you, Mr President.
I take this offer gladly because I do enjoy the job, and I will make every effort to justify your trust.