Debts collection from the population and businesses: regional overview

Government is seeking for ways to collect debts from companies and the population, as well as new ways to improve statistics on debts overdue. New approaches to debt collection could increase social tensions. At the same time, debts accumulate very rapidly and their recovery will force the authorities to adhere to traditional mechanisms, i.e. remission and mutual debt relief for business entities.

On May 1^st, 2012 payables amounted to Br 147.6 trillion, increased by 5.4% since the beginning of the year. At the same time overdue payables reached Br 112.5 trillion: compared with the beginning of the year, increased by 21.6%.

Overdue payables’ share of industry organizations is 44%, agricultural organizations – 26.2%, trade, car, household goods and personal items repairs organizations – 12.8%, construction – 8.3%, transport – 3.8 %, real estate, rent and consumer services organizations – 4.1%.

The authorities have tougher attitude towards debt collection from enterprises, even when it concerns state-owned ones. For instance, the new practice is that the authorities submit debt recovery claims and institute criminal proceedings against managers simultaneously. However debts accumulate very rapidly and their recovery will force the authorities to adhere to traditional mechanisms, i.e. remission and mutual debt relief for business entities.

As of April 1^st, 2012, 35% of business entities were insolvent. Leadership in bankruptcy is with the construction industry (48.9%), transport (43.6%), health (42.7%), communications (42%), and industry (36.5%).

Population’s debts are made up of several sources: taxes, loans, debt-for-service (public utilities). In Belarus, the obligation to pay taxes for individuals falls mostly on the business entities – income taxes are deducted centrally by enterprises’ accountants before wages are paid out. Only self-employed citizens pay taxes on their own and their share is small, therefore the debts in this area are small too.

Populations’ debts for utility services have reduced this year. Local authorities gradually introduce new approaches to debts collection in this area. For instance, they practice disconnection from services, eviction, and a number of reputational means. Sometimes local authorities provide debtors names to be put on lists of individuals who are prohibited from leaving the country. Last week, the Parliament approved the Housing Code’s new edition, which legitimized eviction of those citizens who had accumulated utility services debts. Moreover, the list of grounds for potential eviction from a private dwelling is very elaborate (housing and utility debts, bank debts, the use of habitation for other purposes, improper use of habitation) and in case of a literal enforcement, could trigger an increase in social tensions.