What Will Happen To Belarusian Business If They Increase Taxes

Businessmen are speaking about the suggestions to increase taxes and deductions to the National Social Security Fund (NSSF).

The letter of the State Control Committee to the Ministry of Finance about the increase of taxes and deductions to the National Social Security Fund, which leaked to the internet, made a lot of fuss. This letter affected individual entrepreneurs the most. While the Ministry of Finance is considering the suggestions made by the State Control Committee, the journalists have learnt the opinion of individual entrepreneurs in this regard. Onliner talked to Zhanna Rohava, a partner at the Council for the Development of Entrepreneurship under Lukashenka, on how businessmen assess this letter.

Guiding ideas

During the pandemic, many Belarusian entrepreneurs suffered colossal losses. Many have suspended their business, the rest are trying to survive.

As for the single tax (important to note, the State Control Committee proposes to transfer single tax payers to those paying taxes under a simplified procedure) - such a decision, according to Zhanna Rohava, is premature.

“Individuals, that is, self-employed, also work and pay the single tax,” she explains. - This category of “single tax payers” has a lot of preferences. And here the government needs to think about it. After all, they are not obliged to pay to the NSSF, for example. Therefore, it is necessary to clearly define the category of “self-employed”. And individual entrepreneurs took the opportunity to switch to the simplified tax system last year, and many chose the simplified system for themselves. Those “single tax payers” who remained do not cause any damage to the state.

As for the increase of the tax within the simplified tax system to 16%, Zhanna Rohava believes that this is a very sharp rise. For comparison, now according to the simplified tax system, entrepreneurs pay either 3% and VAT, or 5% of the total revenue.

“If such a decision is made, then a large number of individual entrepreneurs will simply go into the shadows,” she says, and cites her business as an example, which operates under a simplified taxation system. - If I pay 16%, then I will be unprofitable, I will just have to close the business. That is, the risks of closure for individual entrepreneurs are high. We, entrepreneurs, have already said this.

Another offer of the State Control Committee is a 13% commission for withdrawing amounts over 3,000 rubles, or three average salaries in the country. According to Zhanna Rohava, it is too early to raise this question.

- My personal opinion is another increase in the tax base of individual entrepreneurs, - the expert believes. - First you need to figure out why the business works this way. Why does it go broke, why can't it finally grow up? Maybe because there are many other unjustified costs. These are: rent, utilities, reimbursement of all costs to landlords under decree #433, as well as the purchase of a terminal (800 rubles), the percentage of banks, maintenance of cash equipment, and so on. And in addition, this 13% will fall on individual entrepreneurs. I believe that businesses first should be offered an alternative to cash.

According to Zhanna Rohava, the introduction of 13% on amounts over 3,000 rubles will entail that entrepreneurs will simply hide their gross receipts, which means that tax payments will decrease. Moreover, again, this will lead to a massive closure of small businesses.

- This measure puts different business entities in regional, district cities and rural areas in unequal conditions, - Zhanna Rohava notes. - For example, there is the urban type settlement of Parychy in the Svetlahorsk district. The entrepreneurs’ earnings there are much less than 3,000 rubles a month. And Minsk? There can sometimes be such a sum per day. And what should this entrepreneur do? The government should take a broader view of these things. After all, the entrepreneurs earned this money, this is their money. The bank has already earned on the fact that the entrepreneur's money is in its current accounts. So why do the same individual entrepreneurs have to pay a commission for withdrawing their own money? What is forbidden has never brought us any good.

As for deductions to the National Social Security Fund, an increase in the amount of compulsory insurance contributions will be very painful for an individual entrepreneur, Zhanna Rohava believes. Moreover, according to her, the increase will be painful not only for individual entrepreneurs, but also for all Belarusian enterprises. Since deductions to the National Social Security Fund are a large part of the cost. Important to note here, the employer pays 34% of the employee's salary to the NSSF.

- Entrepreneurs simply cannot cope with such a load. An increase in the amount of contributions to the NSSF will immediately entail the dismissal of employees, explains Zhanna. - It is necessary to make a redistribution of insurance contributions between the employer and the employee for a long time. Then many questions will simply disappear by themselves.

-The State Control Committee’s letter caused a storm of negative emotions in the business community, - notes Zhanna Rohava. - Everyone has known for a long time that such letters first undergo a detailed analysis and assessment of the regulatory impact. People are already used to it. Now there is a heated discussion of these proposals. On February 24, we met with the Chairman of the Council for the Development of Entrepreneurship Dzmitry Kruty. We discussed in detail the proposals from the SCC, and put forward our justifications and preliminary proposals.

Regarding the rates of taxes themselves, Zhanna Rohava notes: in the past two years, there have been no questions about the size of the rates either of the single tax, or within the simplified tax system.

- It is possible to work with the current rates. The main issues are related costs and the National Social Security Fund, - the speaker notes. - We are also talking about 13% income tax. Of course, it would be better if it were 9% or 7%. An entrepreneur must get on their feet in order for them to have deductions. Entrepreneurs cannot really take out loans, nothing, they do their business with their own money, and do not receive any benefits.

- Perhaps it would be more correct to look at micro-enterprises and simplify the taxation system for them, - the expert believes. - Because there is an advantage for the self-employed and artisans. Yes, there should be self-employed, no doubt about it. But this is the man who came and battered down a nail, or replaced a faucet, or a seamstress who made a suit individually. And we have labelled the production of underwear as self-employed. But this is manufacturing. Or a hairdresser. But how can a hairdresser become an individual entrepreneur, and immediately work as self-employed? There should be some kind of distinction, and these activities should not overlap.