President of Russia Vladimir Putin: Mr Titov, you probably have a lot of questions for me. First of all, I would like to note that we have ensured that regional legislation is adopted in all the constituent territories to regulate your work and that of your colleagues involved in protecting businesses’ interests
We will talk about this formal aspect of the matter separately, but I would ask you to start with your assessments of how the government-proposed business support tools work in these difficult conditions of fighting the pandemic.
Presidential Commissioner for Entrepreneurs’ Rights Boris Titov: Thank you very much, Mr President.
Indeed, our institute is working. And this pandemic has probably been the most difficult time for us ever, because the coronavirus has brought a lot of problems to the entire country, and especially to business, and the smallest businesses suffered worst of all. Those are businesses that directly serve consumers, in the consumer market, and that is why it was such a blow to the country's economy.
But I would also like to say that we do a lot of analytical work, a sociological survey every two weeks, research on a fairly large sample. Here is the last one we just received. As many as 5,000 entrepreneurs were canvassed, and there is a variety of interesting facts. The most important information is probably that 83.7 percent of businesses have been affected by the problems caused by the coronavirus, to one degree or another. More than 50 percent of them received support, thank you very much for that. A range of support measures have been implemented.
Vladimir Putin: A whole package.
Boris Titov: Everyone who hoped for this support has eventually received it, and in general, we managed to maintain economic stability around the country.
But I must say that, overall, the situation remains difficult. One of the questions in the poll I mentioned was if there are any restrictions in effect in your region now, and 52 percent said they had some official or informal restrictions in the region, and even some restrictions prompted by common sense . That is why most businesses are struggling, although – many thanks – we can see how you and the Government are pursuing a balanced policy with regard to those restrictions, and in general, so far, nothing is fully closed, and this is a very good step, this is probably the best and the main thing.
But, unfortunately, I must say it again, the situation is still difficult. About 19 percent of respondents said their revenues dropped by over 80 percent, and 3 percent said they had closed. Three-quarters, or 76.9 percent, assess their chances of survival as 50–50, which means they feel very insecure. Only 13 percent of companies said they continued to work steadily or have actually increased their turnover.
Many of the realised support measures were indeed very important and many entrepreneurs took advantage of them. And because the pandemic continues (although, of course, there is no total lockdown), today, however, many are reporting that the demand has not recovered completely and some sectors have not even reopened yet. In many regions, cinemas are closed; sport and mass public events are cancelled. These sectors have not even been able to resume operation.
Therefore, today I would like to talk about the possibility of some additional measures that could slightly improve the situation for entrepreneurs at the current stage.
Business people have said that right now, it would be very important to get an extension on the measures that have to do with repayment.
Vladimir Putin: We have already made respective decisions.
Boris Titov: Yes, but it was a three-month extension of the tax break. It should be noted that the support measure that business people have taken advantage of the most is the 2 percent recovery loan that has to be repaid only if the staff is cut down – that is, if employees were dismissed. Otherwise repayment is not required. This measure of support was perhaps the most sought after. Some 38.6 percent business people benefited from it.
Vladimir Putin: I see.
Boris Titov: Of all the respondents, 49.5 percent said that paying would be very difficult for them. Therefore, first, we would like to ask you to extend the payback period and, second, perhaps it would be possible to slightly relax the conditions? Because the borrower has to keep 90 percent of the staff to be exempt from paying back the loan.
Vladimir Putin: There is a scale.
Boris: Yes, there is a scale but those who keep 90 percent do not have to pay back anything. Perhaps it is possible to lower this bar to 80 percent? Unfortunately, many entrepreneurs are dealing with circumstances they cannot control. For example, many people are quitting their jobs because benefits have gone up.
Vladimir Putin: Unemployment benefits.
Boris Titov: Yes, the unemployment benefit has been raised and is rather high now. Unfortunately, small business owners cannot always retain their employees who want to quit.
Vladimir Putin: We should distinguish between resignation and layoffs. I will ask the Government to think about it.
Boris Titov: And, if possible, lower the bar down to 80 percent of the staff. For those who have to return half of the loan, the requirement should be 60 percent retained staff.
Vladimir Putin: Alright,I will think about it.
Boris Titov: Of course, taxes and tax debt restructuring in general are also important. In fact, 52.3 percent of businessmen used this support mechanism, which gave them a substantial boost, especially the 15 percent cut in social security contributions. This helped them a great deal, so I would like to elaborate on this measure a little more.
The repayment deadline has been extended for three months. Unfortunately, in the current environment many will be unable to do so. According to our survey, 49.5 percent of respondents told us that they cannot pay back the money on time.
Vladimir Putin: What matters here are not so much opinion surveys as the actual state in which the companies find themselves.
Boris Titov: This is true. Businesses tend to complain about their hardships. This is a very difficult measure, especially if the second wave had not materialised.
Vladimir Putin: We all understand this.
Boris Titov: In the second quarter some debts were forgiven.
Vladimir Putin: There were many restrictions, and on top of that there was a national lockdown.
Boris Titov: For small businesses, what we want is to have as much of their debt for the third and fourth quarters cancelled as far as possible, so that these debts…
Vladimir Putin: We will definitely look into this. I understand, and you are right to say that this is a challenging situation. We see this, and of course the Government is weighing what else can be done to support businesses and how.
Thank you for highlighting this issue.
Boris Titov: There is also some good news, and I wanted to share them. We carried out a research project with Sberbank. Now we can use big data not only from the Federal State Statistics Service, but also from major corporations, including financial institutions. We carried out the Small Business Development Index research project using data from Sberbank, since 60 percent of small businesses have accounts with this bank.
This was not the first research project of this kind. Overall, we see that the index has increased in the third quarter compared to the second quarter, which means that small businesses are better able to make payments, as well as to pay out and increase salaries.
Vladimir Putin: The reduction of insurance payments from 30 to 15 percent has led to an increase in budget revenue.
Boris Titov: Yes, this is our main conclusion.
Vladimir Putin: Do you confirm that this is so?
Boris Titov: Figures prove this.
Vladimir Putin: Good.
Boris Titov: Indeed, here are the figures: wages have increased by 8.3 percent, the Wage Fund by 11.3 percent, and deductions to social funds by 9 percent. If this trend persists, we will achieve a positive result for the budget and the Pension Fund in the fourth quarter.
Vladimir Putin: In other words, we are moving to the white terrain.
Boris Titov: This practice has shown that the burden on wages is too heavy in the country: 30 percent is too much for official insurance payments. In general, it is largely maintaining and even promoting the development of shadow wages.
Vladimir Putin: I see.
Boris Titov: As soon as we reduced them to 15 percent…
Vladimir Putin: …wages became whiter.
Boris Titov: Yes, this has become more profitable, because paying wages in cash is a complicated process. Businesses need to convert their funds into cash, which costs 12 percent. Though it is an illegal business, it still exists. This is why it has become more profitable to pay white salaries, and this is why we would like to hope that this positive practice will continue.
Vladimir Putin: This is a very useful practice, and we will definitely use it.
Boris Titov: It should be applied more widely, probably in several other economic sectors.
Vladimir Putin: Good.
Boris Titov: I would also like to talk about a matter of biggest concern to me as Commissioner for Entrepreneurs’ Rights. It concerns…
Vladimir Putin: Criminal persecution?
Boris Titov: Yes.
Vladimir Putin: You keep raising this question. You can see that we have responded.
Boris Titov: Yes, thank you very much. Actions under Article 210 of the Criminal Code have been decriminalised. Many of the recent changes have improved the situation, indeed. Regrettably, not all of the problems have been solved.
Vladimir Putin: Let us talk about them.