Without status but with tax: Ministry of Finance offers self-employed people to chip in again

Functionaries make the next attempt to legalise babysitters, nurses and tutors

Without status but with tax: Ministry of Finance offers self-employed people to chip in again Photo: pxhere.com

Functionaries make the next hurried attempt to legalise not registered entrepreneurs. The Ministry of Finance made the new offer in this respect. It offers to impose a new tax for the self-employed population from 2019 – even if still there aren't decision to insurance payments to self-employed people, while they still don't have a juridical status. Realnoe Vremya tells the details.

''For instance, professional income tax''

''We offer a new special tax regime. It will be, for instance, called professional income tax,'' Deputy Minister of Finance of Russia Ilya Trunin announced on 3 May. He specified that the tax could be imposed the following year already, and it wouldn't be one-time but affect every transaction. The rate will be ''about 3%'' for physical persons and 6% — for juridical. Self-employed people will be free of all other taxes, it won't be compulsory to register as a sole proprietor.

Trunin explained it would be possible to pay the tax via a special mobile application: ''Every person will be able to download [it] on his tablet or smartphone, go through biometric identification – like today's identification during, for example, the registration in car sharing services.''

President Vladimir Putin said in his March address to the Federal Assembly about the necessity to create a service thanks to which it would be possible to register a business by one click and make compulsory payments. He added that sole proprietors and self-employed people don't need to report at all: ''This all is such a routine, at first sight, you know. But this routine is what doesn't allow us to vigorously move forward.''

''We offer a new special tax regime. It will be, for instance, called professional income tax,'' Deputy Minister of Finance of Russia Ilya Trunin announced on 3 May. Photo: minfin.ru

The Ministry of Finance presented its fiscal initiative despite the presence of several ''buts'' at once. Firstly, now the country doesn't have a single opinion about who should be considered self-employed: the Ministry of Justice is trying to define their juridical status. Without waiting for its decision, the Ministry of Finance offers its own. According to Trunin, those who have income from products or services but don't hire workers should pay the new tax.

Secondly, the presupposed data of the tax imposition. Functionaries just recently weren't going to impose a tax for self-employed people in 2019. In 2017, the citizens who worked without the status of sole proprietor but provide services to physical persons were freed from the income tax payment for one year (however, only three categories of self-employed people are meant: housekeepers, babysitters and nurses). To use this concession, one needs to register in tax authorities and, consequently, obtain a patent. A government bill on prolongation of tax holidays till late 2019 has been laying in the State Duma since this April. The bill went through the relative committee and was to be considered in the first reading in May. It's unclear how it correlates with the current offer.

Thirdly, the Ministry of Finance's idea isn't the only one. The Ministry of Economic Development had offers to legalise self-employed people. But they weren't much different from the concept Trunin described.

Ilya Bykovnikov, head of RANEPA Department of Management of the Higher School of Finance and Management, notices that, indeed, the concept ''self-employed'' hasn't been clearly defined. Apart from tutors, nurses and housekeepers, it was supposed to refer those who provide photo shooting services to physical persons to self-employed people. There was also an opinion that the citizens who rent a dwelling to this category – but this didn't work out.

Apart from tutors, nurses and housekeepers, it was supposed to refer those who provide photo shooting services to physical persons to self-employed people. Photo: Maksim Platonov

Squeak of legalisation

The legalisation of not registered entrepreneurship is a lasting pain in the neck of authorities. This process goes on with a squeak. But no concessions are helping now. For instance, just 40 people officially registered in Russia during the first three months after imposing tax holidays for self-employed people in 2017. So, four people registered in Moscow: two of them mentioned they dealt with cleaning, the other two provided services as tutors and nurses.

In a talk with RBK one year ago, Business Ombudsman of Russia Boris Titov stated the creation of the institution of the self-employed people ''had almost failed that day''.

In Bykovnikov's opinion, the bonuses the country offers to self-employed people don't look so attractive until one of the major problems is solved – insurance payments, which are a serious burden for sole proprietors. According to Kommersant's data, the government categorically doesn't want to divest the pension and medical insurance system of payments of entrepreneurs.

''What do I think the bone of contention is? In our country citizens didn't get used to making additional payments from their income. When sole proprietors were said at the stage of reformation they would pay [insurance payments] for themselves, so that these payments would reach their destination, it took four years. If we are saying now that self-employed people need to pay a part of the income, it's unlikely to happen very fast. It is also likely to take several years,'' says Bykovnikov.

In late April, owner of Bakhetle Muslima Latypova complained Tatarstan President Rustam Minnikhanov about the women who are on maternity leave – ''pseudo-entrepreneurs'' who ''take away volumes'' of her trading chain. Photo: Oleg Tikhonov

Head economist at Expert RA Anton Tabakh told Realnoe Vremya whether more Russians would register as sole proprietors and self-employed people would depend on several factors: ''This can work out if the conditions are liberal enough. And they are likely to be so. Cash turnover is getting narrower. And now even settlement with tutors is achieved via banking applications. If there are more and more transactions under control of banks and the country, at one point it will be easier to register [than remain in the shadow].''

Tabakh says the question is whether the benefits from the additional flow of small entrepreneurs are so obvious for the country: ''The budget mainly grows thanks to completely different sectors. It's not excluded these costs on registration and fiscal administration of entrepreneurs will be higher than the incomes they will pay.''

We will notice that the urges to put self-employed people's services in order come not only from functionaries. For instance, in late April, owner of Bakhetle Muslima Latypova complained to Tatarstan President Rustam Minnikhanov about the women who were on maternity leave – they are ''pseudo-entrepreneurs'' who ''take away volumes'' of her trading chain. ''They invaded social networks. They prepared a pie, they are on a roll, they woo specialists and take away volumes from us, honest producers. They do different things – the full assortment of Bakhetle! But in what conditions? In a flat, in the garage, in the sauna. There are animals there!'' Latypova was indignant and asked Minnikhanov to ''stop it''.

By Artyom Malyutin