Government wants businesses to be socially responsible

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April 22, 2016 18:19

Giving away awards to entrepreneurs, Prime Minister Myasnikovich raised the issue of ‘shadow economy’ exercised by a significant number of businesses. However, it is the government’s law-making, what stimulates business to use various tax evasion schemes.

On September 19th, 2012 the awarding ceremony “Best Entrepreneur in 2011” took place.

Various reports assess ‘shadow business’ turnover in Belarus at about 30% of GDP. The problem of ‘shadow economy’ is not an exclusive Belarusian problem. ‘Shadow economy’ is a phenomenon that could be found to a greater or lesser extent in almost every economy in the world. In Belarus, the main problems are high taxes, a complex taxation system and the lack of desire among businesses to work for the future.

Therefore, delegating these problems to business alliances is not quite right. Taxation problem is primarily linked to the tax legislation, on which business alliances have a rather limited influence. The more so, the government itself creates the ‘shadow economy’ by setting up control indicators for business activities.

In the national budget there is a line titled “penalties”. When penalties are projected by the law in the state budget it is not a matter of presumption of innocence any longer. Business is ‘guilty’ by definition and there are ‘legalized’ fees it has to pay, reflecting the minimum price for doing business in Belarus. Controlling (auditing) bodies receive a ‘plan’ for collecting fines, and if they fail to meet it, sanctions will be applied to them. In these circumstances, it is impossible to talk about auditors’ impartiality.

Effectiveness of tax audits is close to 100%, which does not mean the tax authorities are efficient. The legislative environment in question makes it impossible to do business without breaking the law. Therefore, if tax or other controlling authorities do not find violations, most often it means that they were not tasked with finding violations and / or the tax collecting plan had already been fulfilled.

For many years business was treated as the source of solving national and local budget problems and in response business has developed a fast profit-making approach, inter alia by using concealment of income schemes. Businesses do not have long-term strategies due to the instability of the legislation. It is not feasible to work for the future in an environment where business can be lost in one day after a new law is adopted.