- the right of all citizens to engage in entrepreneurial activity without the exhausting procedure of drafting constituent documents and their inspection by various channels and registration (often incurring significant expenses);

- the potential founding of non-traditional enterprises (without an obligatory accounting department and statistical book-keeping, a stamp and settlement account at a bank, a complex relationship with the tax inspectorate, etc.). In addition, individual p rivate limited liability enterprises enjoy all the rights envisaged by existing legislation: the signing of all types of agreements, including employment contracts; the opening of a settlement account at a bank; and the protection of rights in courts of l aw and arbitration;

- a simplified procedure for paying taxes: the proprietor of a private enterprise only needs to fills out an income declaration, used to calculate all taxes (income, value-added, excise, and local). It has been recommended that the taxation service apply a similar procedure for taxing private limited liability enterprises, to the one used for individual entrepreneurs whose operations do not involve the establishment of enterprises. The provision of a tax credit is essential: for instance, value-added, exc ise, and income tax are fully paid at the end of the fiscal year, whereas the entrepreneur pays other relatively small sums quarterly or monthly;

- tax breaks (the claiming of some personal expenses and consequent reductions in income tax; the exemption of the proprietor of a private enterprise from profit tax; a simplified procedure for collecting value-added and excise tax; and the initial exempt ion of these enterprises from local taxes);

- increased accountability of entrepreneurs to consumers. For instance, if customers have been deceived, the threat of court action against the proprietors of private enterprises will be made more substantial. If substandard goods harm consumers, claims m ay be filed against the entire personal property of the proprietors of the private enterprises, if the courts deem that the indirect harm to the consumers is considerable (e.g., in terms of medical expenses, loss of income due to illness, etc.).

For the authorities:

- first steps toward the formation of a civilised market: the potential legalisation of the "black market", with the simultaneous banning of unrestricted commerce by unregistered entrepreneurs;

- the tax office's accumulation of experience under the new conditions. Principally, this concerns tax declarations and personal tax returns. New methods can be improved (the calculation of personal incomes and expenses from entrepreneurial activity, oper ations of the tax auditing department, etc.) at first for the relatively small group of proprietors of private enterprises. This experience will be indispensable during the inevitable transition to income declarations by all individuals.

[up]

[previous] [CONTENTS] [next]