EXPERTS POINTED OUT THE NECESSITY OF BUSINESS AND MINISTRIES’ PARTNERSHIP

The Association of Lawyers and Law Firms for Registration, Liquidation, Bankruptcy and Pre-trial Representation, together with representatives of the All-Russian public organization Business Russia, organized a roundtable discussion on the subject “Causes of Conflicts between Business and the State” at the Russian Chamber of Commerce and Industry on March 30, 2021. Within the framework of a conversation, the participants discussed the issues of misunderstanding between business and the state - what were they and how to avoid them?

The discussion was opened by the vice-president of the Association, Vladimir Kuznetsov, who noted that until now, there was no effective dialogue between the state and business that could allow taking the needs of entrepreneurs into account at the legislative level and building a lawmaking model that would combine the balance of interests of business and the state. Ministries and departments do not take into account the opinion of the expert community, public associations and business representatives when preparing draft laws. As a result, active representatives of the expert community and entrepreneurs are forced to write numerous letters and seek reconsideration of the amendments.

The expert noted that after the announcement of the roundtable discussion, an Order of the Government of the Russian Federation (note: Order No. 677-r dated March 19, 2021) on the need to restructure the work with experts, industry associations, legislative bodies and the public appeared. For these purposes, it is planned to create an examination and planning department. This is a huge step towards the establishment of a dialogue on the decisions considered by the Government.

The speaker recalled that small and medium-sized businesses made an invaluable contribution to the development of the national economy. Kuznetsov noted that SMEs did not have their own significant resources. They directly depend on the well-being of the population, and therefore such a business area is most vulnerable during a period of economic instability.

“The cancellation of the moratorium on bankruptcy, coupled with the absence of an effective legal model for restructuring accounts payable, accumulated by business during the period of restrictions, entails the inevitable closure of small and medium-sized enterprises,” said Vladimir Kuznetsov.

The expert also added that the crisis was only a catalyst for business problems that had existed before. He recalled that over the past 3 years, according to the Federal Tax Service, the number of SMEs had been steadily decreasing, while the state used local methods to support business. In such a situation, an important step towards supporting SMEs is not only the implementation of targeted measures for the affected industries, but also the creation of an effective open dialogue between the state and business, as well as the modernization of the legal regulation of certain areas of Russian entrepreneurship, which contributes to solving the problems of business and its development.

Anna Smirnova, the Founder and CEO of an international law firm CAPITAL PARTNERS GROUP LLC, recalled that the President instructed to direct the bankruptcy procedure towards rehabilitation and make appropriate changes to the bill. But the developed changes did not suit anyone - neither business, nor arbitration managers, which is why it is necessary to work on this.

 

Anna Smirnova noted that the pandemic was not an ordinary crisis. In the current situation, it will not be possible to quickly recover and return to dynamic growth without changes at the legislative level.

Elina Sidorenko, the CEO of the ZaBiznes.RF ANO and a Platform for Working with Entrepreneurs' Appeals, relying on her experience, announced an acute problem with force pressure in the field of bankruptcies. She noted that the appeals to the platform filed by the entrepreneurs were immediately sent to the supervising departments of the Ministry of Internal Affairs, the Investigative Committee, the FSS, etc.

The expert stressed out that the available data were enough to identify systemic issues. Sidorenko believes that bankruptcy is a decrease in the immunity of the entire business. When this happens, various diseases come, for example, articles of the Criminal Code on deliberate, fictitious bankruptcies, illegal actions.

“So far, the statistics on bankruptcies does not exceed the indicators of previous years. But there are prerequisites that it will go off the scale, added Sidorenko.”

Due to the vague jurisdiction today, any law enforcement agency that has become aware of the fact of a crime, can initiate a bankruptcy case. As a result, there is a risk of ordered bankruptcy cases. In addition, the speaker recalled that cases may be initiated on the basis of on-the-spot checks. But in fact, it often turns out that there are no documents confirming the legality of the measures applied .

“Today there is no understanding of what is the basis for recognizing an organization as incapable of fulfilling obligations to debtors,” added Sidorenko.

At the same time, the speaker is sure that after the lifting of the moratorium on bankruptcy, there will be many checks. It is necessary to develop an algorithm, regulating, where bankruptcy proceedings and arbitration procedures end, and where the criminal law sanctions begin. Sidorenko considers it necessary to create recommendations of the Supreme Court in terms of determining the border of legality and illegality.

Elina Sidorenko and Vladimir Kuznetsov also noted that it was necessary to reduce the risks of criminal prosecution of decent entrepreneurs, and, on the contrary, to tighten them for those who initially commit violations, understanding the consequences. The assessment of the legitimacy of the actions of the management should be performed by the specialized appraisal companies in order to avoid a free interpretation of the actions by the investigator.

Vladimir Kuznetsov also made a proposal to improve the situation. He informed the audience about a recent working trip to Yakutia. It turned out that the Ministry that regulates the issues of the northern and arctic territories is located in Moscow, in Moscow City area, and in quite comfortable conditions. The speaker added that the problems of the northern and arctic territories are completely invisible from there - the ministries do not hear the “voices of Yakutia”.

Kuznetsov called for the ministries to be transferred to where they regulate activities in order to better understand their work.

The expert also noted that today, many public positions are occupied by musicians, actors, acrobats, priests. Of course, these are people who have achieved success, but they have little understanding when making decisions in other areas.

Director of the Association of Independent Pharmacies SRO Viktoria Presnyakova announced a draft law on the regulation of pharmacy chains - now it is under consideration. The expert noted that there was absolutely nothing to regulate in the industry, because today pharmacies operate with low profitability. However, many government officials disagree with this fact. Moreover, one of the MPs recently said that pharmacies should not make money at all.

Presnyakova added that pharmacies are ready to work for the good of the country, but this requires support from the state. The state does not hear the pharmacies.

Andrey Pavlov, the founder of the Zenden group, said that in the current situation, there could be no conflict between business and the state. The entrepreneur noted what incredible steps the company had taken to “whitewash” the business. For example, in Italy, only the price is written on a pair of shoes, but in Andrey Pavlov's company, everything is written "from a to z", including the funds spent on labeling, online cash registers, etc.

According to the speaker, the whole country should work in the same tax regime with VAT. Speaking specifically about the problems of the footwear industry, Pavlov said that over the past year, 140 million pairs of unmarked shoes were illegally imported into Russia. At the same time, customs officials and security officials claim that they cannot stop this, because small businesses cannot be checked.

“In our sector of the economy, all crimes are committed in the area of the small business, and it cannot be checked,” the expert emphasized.

Andrei Pavlov spoke about the situation in Dagestan, where 90% enterprises of white business was simply closed - an active dawn of smugglers is taking place in the region. The speaker raised an issue about the work of the employees of control bodies - whom do they support in this situation? The businessman is sure that the situation can be changed only through the Tax Code: there must be an equal system of doing business, a single coordinate system.

Pavlov also noted that when he was talking only about the shadow segment of the small business - he has nothing against the whitewashed one.

The restaurateur and founder of the Meat & Fish chain of restaurants and the vice-president of the Federation of Restaurateurs and Hoteliers of Russia, Sergei Mironov, indicated that the main reasons for the conflict between business and the state were in non-working legislation. He explained that restaurateurs are asking to bring legislation in line with the realities of the market, but many perceive it as some kind of whim.

“The number of norms is so big that it’s not possible to fulfill them, and impossible even to read them all. Business does not understand what to do, said the restaurateur.”

Mironov notes that the industry is following the path of "complete whitewashing", but there are a lot of problems. Restaurants cannot operate under the general taxation system, and the establishments do not physically have input VAT. In addition, many restaurants do not fit the criteria for SMEs, which significantly complicates the business activities.

Sergei Mironov added that restaurateurs are ready to enter the "white" business and even pay three times more taxes if the legislators meet halfway. But this has not happened yet. 

In the final part of the discussion, Vladimir Kuznetsov urged the conference participants to take a tough stance and start “knocking on all doors” so that the business and its proposals could be heard. The speaker also noted that the existing proposals would be considered and reported to the relevant authorities.

As a result of the meeting, a joint letter will be prepared to be sent to the government agencies. Roundtable discussions with the representatives of business and government are planned to be held on a regular basis to identify and analyze current problems of interaction between government and business.