Putin to End Rule On Cash Registers

The government will ease life for small businesses by simplifying their taxes and ditching a requirement that they must all use cash registers, Prime Minister Vladimir Putin said Wednesday. The cutoff level for small businesses to get access to the simplified tax system will be raised to 60 million rubles ($1.77 million) in annual revenues from the current 30 million rubles, Putin told the All-Russia Forum on Small and Middle-Sized Businesses. The government will lose more than 100 billion rubles in taxes as a result, the Finance Ministry estimated. The simplified tax regime envisages an entrepreneur paying only one tax -- either 6 percent of revenues or 5 to 15 percent of the net profit. Most small and middle-sized businesses currently pay taxes on imputed income, which means that the tax inspector calculates their taxes with a complicated formula. Under the common tax system, companies pay revenue tax, property tax, unified social tax and value-added tax. Putin said smaller businesses would get relief with a decision to scrap cash registers, which became mandatory in all shops in 2003 amid a state effort to boost tax collection. "The cash registers are often more expensive than the goods that are sold in the shop," Putin said. Entrepreneurs use 2 million tax registers, which cost an average of 15,000 rubles ($442) each, Putin said. Overall sales rung up on them amount to 30 billion rubles per year, plus an additional 10 billion rubles to service them over the same period, he said. "With that, the amount of [sales] revenue doesn't matter when one pays taxes on imputed income," Putin said. Legislation on the cash registers will be drafted by July 1, Putin said. The measure was welcomed by businessmen at the conference, who said cash registers have become a nightmare for them. "You first have to buy the machine for 15,000 rubles, then regularly change the flash memory device, which costs 9,000 rubles -- and pay for servicing it all the time," Volgograd businessman Andrei Udakhin said on the sidelines of the conference. "The data registered by the machine has never been used, because the amount of taxes we pay does not depend on that," said Udakhin, who owns two minimarts employing 35 people. Udakhin called the new tax measures "very useful and logical," but he said small businesses still needed a lot of changes to the Tax Code. "It is very hard for small and middle-sized businesses to switch to the simplified tax system that, for one thing, requires you to have more than 150 square meters of commercial space," Udakhin said. "Most small businesses don't have that much." Business confidence is at a four-year low now, Economic Development Minster Elvira Nabiullina told the conference. Forty-four percent of small businesses call high taxes their biggest problem, she said. Putin said an extra 15 billion rubles would be earmarked for regional funds that offer state guarantees as collateral for small businesses. The funds have received 2.5 billion rubles so far. In another measure of support, at least 20,000 microloans of up to 1 million rubles each will be given out this year, Putin said. Sberbank chairman German Gref said Tuesday that the state-controlled bank would introduce a microloan program, under which borrowers could obtain the funds in two to five days. The state's bailout of banks will be tightly connected with the number of loans they issue to small and middle-size businesses, Putin said. The government has earmarked 10.5 billion rubles to support small businesses this year. Small businesses will receive 100 billion rubles through state banks in 2009, Vneshekonombank chairman Vladimir Dmitriyev said on the sidelines of the conference. Vneshekonombank, or VEB, has said it will hand out loans for 30 billion rubles to small businesses this year, up from 9 billion rubles in 2008. The European Bank of Reconstruction and Development and Deutsche Bank are ready to give out loans worth 1 billion euros to Russian small businesses with VEB guarantees, Dmitriyev said. Although regional banks are growing plump with state cash, the situation has not improved for entrepreneurs, Udakhin of Volgograd said. "The interest rates at the banks are still high, from 28 to 40 percent, which we could never afford," he said. He said the average before the crisis was 16 percent.