Street work: that the state can offer self-employed

The attempts of the officials to legalize the labor of self-employed is unsuccessful. Citizens do not offer economic incentives that push them out of the shadows

Legalization of self-employment rather actively discussed in Russia, including at the highest state level. In November 2016, the State Duma adopted the law that liberated the self-employed such as cleaners, nannies, nurses and Tutors, from taxes for a period of two years until 31 December 2018, subject to official register their activities. The regions received the opportunity to define additional types of professions, to apply this law. And at the end of January in the state Duma was introduced a bill that would allow citizens to conduct some types of income-generating activities without registration as individual entrepreneur. This is to protect the self-employed from accusations of illegal business.

Grey area

The relevance of the question due to the high share of shadow sector in the Russian economy. It is estimated that in Russia there are from 15 million to 30 million citizens, officially not working, but who have informal income that are not taxed. Many of them receive state benefits as underprivileged, the poor, the unemployed. Shadow employment takes away from the budgets of all levels from 1 trillion to 3 trillion in a year when the total revenues of the consolidated budget last year of about 27 trillion rubles. While formal entrepreneurship in the Russian economy is extremely small. Small and medium-sized enterprises (SMEs) in Russia accounted for only about 20% of GDP and 27% of jobs. For comparison: in Europe these figures are, respectively, 50-60% and 60-70%. Legalization of self-employed labor would significantly increase state revenues from taxes and reduce the burden on the pension system.

However, the new legislative initiative is unlikely to withdraw from the shadows at least a small number of self-employed and improve tax collection. Unlike the categories of self-employed, sometimes receiving significant income (photographers, designers), and those who has the potential to expand the business (farmers, seamstresses, craftsmen engaged in repair and construction), self employed, listed in the law on tax breaks, are mostly necessity-driven entrepreneurs: cleaners, nannies, nurses and Tutors, as a rule, endow yourself, and the potential expansion of their activities is small. In General, the self-employed do not see any advantage to formalize their status. And from time to time sounding ideas about deprivation of the illegally self-employed or unemployed citizens free health care only add fuel to the fire.

Help in exchange for taxes

But for real the legalization of those self-employed who may still be interested in expanding your business, need clear economic incentives. Many of them are discussed in Russia is already not the first year. First, this should include facilitation of interaction between business and government through the creation of multipurpose centers by analogy with the centers of the “My documents”, create a single information database on enterprises, which would free small businesses from having to file paper reports the simplification of the procedure of receiving and payment of patents, the introduction of quality of information support that would allow small businesses to obtain all the information in one online resource containing all the mandatory requirements and feature easy navigation, and the measures of state support.

Secondly, an important role can play the free educational programs and free consultations on business development, as well as additional financing tools for the self-employed. Requires the creation of a broad consultation network that connects the industry associations and experienced businessmen who are ready to act as mentors and consultants, and aspiring entrepreneurs. These measures are the most important for those self-employed who wish to hire employees, to move from simple business models to more sophisticated, to enter new markets, but don’t know how to do it.

Finally, it is very important decrease these risks of conducting legal business as excessive pressure from regulatory bodies, numerous bureaucratic requirements, frequent changes of “game rules”, etc. These risks need to be minimised by the introduction of moratoriums on inspections and any legislative changes concerning the operation of small and medium enterprises (except those that explicitly facilitate the conditions for entrepreneurial activity), including changes in reporting.

The authors ‘ point of view, articles which are published in the section “Opinions” may not coincide with ideas of editorial.

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