The annual report by the Presidential Commissioner for Entrepreneurs' Rights was earlier submitted to the President under the Federal Law On Commissioners for Entrepreneurs' Rights in the Russian Federation of May 7, 2013.
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President of Russia Vladimir Putin: Mr Titov, like a true bureaucrat, you brought along heaps of papers.
Presidential Commissioner for Entrepreneurs' Rights Boris Titov: Unfortunately, problems abound, so the report is large.
Vladimir Putin: I am aware that you brought along a report about what you have done over the past year as the main watchdog protecting entrepreneurs' rights. I will definitely go over all this and then ask you to comment on it.
But, first, I would like you to simply provide an assessment with regard to how effective were the measures to support business and entrepreneurship taken over the past challenging pandemic period.
Boris Titov: You know, they were quite balanced. Truth be told, at first we were a little disgruntled and did not quite like everything, but in fact, judging by the result, we see that the measures were well-balanced, effective and timely.
The single measure that probably worked the best was that business closures were approached with much caution. That is, at the first stage it was a necessary thing to do, but during the second stage, autumn went by without full closures, which, of course, was very beneficial for businesses.
All the while, I must say that we relaxed our efforts a bit too early, and the situation has worsened again. But the fact is that the third and fourth quarters of 2020 were very successful, because we managed to almost restore small and medium-sized businesses to their previous state, and major businesses (manufacturing and industrial business) lost less to begin with.
Unfortunately, the first quarter of 2021 was not as good. We are working with Sberbank on a special small business development index. Regrettably, it showed that small businesses’ revenue plunged by 19 percent, which means that the downward trend caught up with business in the first quarter.
Vladimir Putin: Why?
Boris Titov: This has to do with delayed demand; the third and fourth quarters saw a major increase in sales and revenues of small businesses. The first quarter was more balanced; people’s life was returning to normal, and they are now taking a more sober view on their possibilities and are saving more, and so the first quarter was not very good, regrettably. The situation has reportedly improved, but we have no data regarding this so far.
We are monitoring the COVID effects once every two weeks, conducting large sample polls of business people. The latest poll has shown that the demand has fallen, and 65.8 percent of the polled businesses are not feeling the effects of increased demand. In short, we must remain cautious.
Of course, in this connection and taking into account the complications and the possibility that the authorities will have to introduce some restrictions, it would be wise to think about new support measures. We once had a very effective measure, 2 percent interest loans for retaining jobs. It enjoyed the largest demand, with several hundred billion rubles allocated to businesses in the form of such loans. The bulk of the sum has not been repaid, because companies preserved jobs and so were not obliged to return the loans.
It could be wise to think about extending this measure or to consider a second phase of this project in the event of any new complications.
In addition to this, we have a number of other proposals regarding new support measures for business. They have to do with cadastral value and the matter of…
Vladimir Putin: It was initially a questionable idea.
Boris Titov: Yes, this is a big problem. We suggested freezing it at the 2019 level, and later it was decided to set it at the 2020 level, but ultimately the decision was not adopted.
Vladimir Putin: We should coordinate this matter with large cities. This is primarily important for large megacities and their incomes.
Boris Titov: Yes, of course, this concerns their revenues.
In addition to that, one measure was working quite well. We have already covered this. It is about social contributions. When we took the first step to reduce this to 15 percent above the base for small and medium-sized businesses, the result was achieved. Frankly, we did not expect this ourselves. We saw the revenue of the Pension Fund increase by over 2 percent. We halved the rate, and the revenue increased by more than 2 percent.
Vladimir Putin: It has become more economically justified, that is all there is to it.
Boris Titov: We need to continue down that path. This means that it is economically viable: personal income tax has grown by more than 6 percent in terms of fiscal revenue, that is, it now makes more economic sense for businesses to make official payments without resorting to grey schemes …
Vladimir Putin: No one needs them.
Boris Titov: So, our proposal is to continue with it. First, it can be applied to the entire salary and we can get rid of the minimum wage as a base before deduction. Well, perhaps, in the future, we will apply this to other types of businesses as well.
Vladimir Putin: The Government is working on it, I have received reports on it.
Boris Titov: This is one of the measures that are holding back growth a lot, because our taxes on wages are very high at 30 percent.
Vladimir Putin: Especially for high-tech companies, this is the most important thing.
Boris Titov: Of course, we would also like to discuss another decision, although, frankly, it was a very good year with regard to one thing – 2020, I mean – there has been a threefold drop in the number of inspections. This, of course, was due to the fact that the pandemic …
Vladimir Putin: With the desire to preserve companies and retain employees.
Boris Titov: Yes, and I wanted to mention this, because the state decided to extend the moratorium on small and medium-sized businesses’ inspections, and it worked. Therefore, in our report, we are asking you to extend it until 2022, because, unfortunately, we see that the pandemic is not letting up.
And the most important conclusion that can be drawn from the fact that the number of inspections has dropped sharply …
Vladimir Putin: It is not getting worse.
Boris Titov: No, nothing had happened, no disasters, no mass poisoning, nothing. That is, we see that the control and supervision functions in our country are clearly redundant and they can be scaled down. Right now, the regulatory guillotine is being worked on, and the adopted laws on oversight activities are being put in force. This is critically important in order to stave off the reinstatement of widespread inspections, which, unfortunately, we used to have before.
Vladimir Putin: I see. Let’s take a closer look at this.