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Books by Grigory Yavlinsky
Economics and Politics in Russia
The Center for Economic and Political Research (EPIcenter)
Nizhni Novgorod-Moscow, 1992

4.1 Entrepreneurship and Property

4.1.2. "Free" Registration (Self-Registration) of Private Enterprises


Unresolved Issues

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Abuses may occur under a system of self-registration. There is a general principle for combatting such abuse: the partners of individual enterprises (or full partnerships) should exercise great care. For its part, the state (the tax inspectorate, internal affairs department, etc.) should step up its control (by compiling "black lists" of false certificates, collaborating with state agencies of other regions, etc.). However, one should realise that such infrastructure is still in its embryonic stage, and that mistakes may be made. Individuals may currently establish several unlimited companies. This should be prohibited. However, it is virtually impossible to control at the registration stage. Such abuses could be detected with the aid of tax auditing department, including clandest ine operations.

The issue of social insurance for both enterprise proprietors and their employees (upon the signing of an appropriate work contract) remains unresolved. It is inadvisable to introduce for individual enterprises (or full partnerships) the corresponding de ductions stipulated for legal entities. This problem should be solved by the parallel formation of private insurance companies. The clear-cut application of tax breaks is most important: a simplified and preferential system for paying VAT, i.e., it should be gradually reduced for private entrepreneurs; instead of excise taxes, the sale of licenses; and a decrease in the profit tax base by transferring a share of the expenditures to enterprise expenses. It would be expedient to consider the provision of tax credits to proprietors of individual enterprises (and full partnerships), at least a reduction in value-added tax, for the fir st year or two after its registration.

Free registration should necessarily include relevant decisions by state arbitration bodies (the acceptance of claims for and against Certificate holders). It would be preferable to maintain an advance agreement with commercial banks regarding the opening of settlement accounts for unlimited companies, and the terms for any loans.


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