Source Pravda.Ru

Count All Businessmen, Before It’s Too Late!

Russian State Statistics Committee dreaming about all-Russia economic census
It is astonishing that Russian officials are so optimistic about the state of the country’s economy. Large research centers declare that the shadow economy is on the decline, and they say that the shadow economy makes up over one-third of the Gross Domestic Product. Deputies and members of the government place great hopes on building of a civilized and stable financial market in Russia, which would allow domestic investment to increase. As if it is enough just to pass good laws and people will immediately start investing in the domestic economy. The Russian State Statistics Committee seems to be the only reasonable institution in this situation; it plans to hold an all-Russia economic census, before all active economic elements don’t withdraw to the shadow once again.

The All-Russia economic census is scheduled for April 2004, the committee reported Wednesday. The census is designed to obtain information about the activities of Russian enterprises, their turnovers, and their number of employees. According to deputy chief of the department for statistics on enterprises in the State Statistics Committee, Tamara Kotlyarevskaya, currently available statistics provides only information about average and large enterprises in the country, and small-scale business is reviewed optionally, Gazeta.Ru informs.

This measure is extremely timely, as Russia’s small-scale business is 100% shadow business. Moreover, practically the whole of small-scale business in Russia earns money for Russian (and not only Russian) organized crime and corrupt officials. Thus, the state loses a considerable amount of potential tax money, no matter what optimistic economists cautiously state about the economic situation. For instance, Russia’s newspaper Izvestia quotes the research “Coming Out Of The Shadow” issued by the Aton investment group on Monday. According to the analysts who conducted the research, the shadow economy in Russia is on the decline.

Experts say that the 1998 crisis is the main reason for the shadow economy’s expansion. The peak of economic activity outside the limits of the official statistics and taxation came exactly during the crisis period. Experts say that at that time, the shadow economy made up 45% of the GDP. Today, it is gradually reducing and makes up less than 37% of GDP. The considerable size of the shadow economy is explained with the excessive regulation of business activity and the complexity and punishing character of the tax system itself. However, the situation started improving after the government carried out tax reforms.

At the same time, experts say that although the situation in Russia’s economy is improving, a great part of it is still outside the official statistics and beyond any governmental control. It is believed that the “grey” economy hampers improvement of the “white,” official economy. Judging by world experience, analysts say that in different countries, the transparency of economy and the degree of its freedom correlate with the state of the economy and increase of the GDP share per head. On the other hand, the size of the shadow economy is not a hindrance to development. Moreover, in many cases, during a crisis or other serious economic shocks, the existence of a “grey” economic sector alleviates social consequences of economic disasters and prevent the “white” economy from collapsing.

Analysts explain this phenomenon with the fact that the existence of the shadow economy creates a potential for further growth of the official economy. Further, the shadow economy is turning into a reserve of the official economy, and when it comes out from the shadow, it strengthens the official economy. In other words, there is no criminal, illegal economy that doesn’t want to become respectable some day. And Russia has got considerable reserves for such an ascent.

Duma deputies are anxious about the shadow sector of the economy in their own way. A month ago, Duma vice-speaker Georgy Boos said that Russian businessmen don’t believe in tomorrow because of the corruption and greediness of the officials, which is why they prefer to ear money “in the shadow” and take it out of the country. He said that from 250 to 350 billion dollars are deposited in accounts of Russian citizens in foreign banks. And although the outflow of capital from Russia has reduced recently (it reduced by 10 million dollars in 2002 as compared with the previous year), the mess with the Russian red tape hampers the ultimate extermination of illegal business.

The deputy, who was a famous businessman himself some time ago, expressed an old dream of the Russian deputies about amnesty of capitals. Especially that law enforcement authorities report that criminals make up only a half among the holders of accounts in foreign banks. The rest are those who preferred to deposit money in a safer place.

It is not ruled out that the creation of a favorable financial climate in the country will help to restore at least a part of the money that people hide back to the country’s economic turnover. However, the intention of the RF Statistics Committee to take advantage of the tax “thaw” and make a census of all businessmen means some prudence of the authorities and rather justified distrust to the population. On the other hand, isn’t it possible that the government will take the census of all businessmen in the country and then raise the taxes again? Nobody will protest against such measures after parliamentary and presidential elections, and businessmen will just take their money and withdraw back to the shadow.

Kira Poznakhirko PRAVDA.Ru

Translated by Maria Gousseva

Read the original in Russian: http://economics.pravda.ru/economics/2002/7/21/58/3879_ShadowEconomy.html

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