Strategies of the Development of Entrepreneurship and SME
Strategies of the Development of Entrepreneurship and SME
Strategies of the Development of Entrepreneurship and SME
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The same problem exists in getting credits mainly conditioned with absence <strong>of</strong> longtermloans, high interest rates, strict requirements <strong>of</strong> banks for getting loan etc.The most important part <strong>and</strong> at <strong>the</strong> same time <strong>the</strong> sharpest problem <strong>of</strong> doing businessin Armenia is paying taxes. It is conditioned by <strong>the</strong> number <strong>of</strong> taxes, duties that <strong>the</strong> companymust pay or withhold in a given year, as well as measures <strong>of</strong> <strong>the</strong> administrative burden inpaying taxes, which include <strong>the</strong> number <strong>of</strong> payments an entrepreneur must make; number <strong>of</strong>hours spent preparing, filing, <strong>and</strong> paying <strong>and</strong> <strong>the</strong> high percentage <strong>of</strong> <strong>the</strong>ir pr<strong>of</strong>its <strong>the</strong>y must payin taxes. The taxation system in Armenia consists <strong>of</strong> direct taxes, including those that spendupon <strong>the</strong> result <strong>of</strong> <strong>the</strong> taxpayer’s activities (l<strong>and</strong> tax <strong>and</strong> property tax), indirect taxes (valueaddedtax, excise tax), as well as <strong>of</strong> payments substituting taxes (simplified tax, whichsubstitutes to value-added tax, income tax or pr<strong>of</strong>its tax for <strong>the</strong> taxpayers; fixed paymentswhich substitute to <strong>the</strong> value-added tax, excise tax <strong>and</strong> –for some <strong>of</strong> <strong>the</strong> taxpayers-<strong>the</strong> incometax <strong>and</strong> pr<strong>of</strong>its tax). In general <strong>the</strong>re are 50 payments during <strong>the</strong> year have to deal with. Ittakes 1.120 hours to pay taxes, duties, which compose 36.6% <strong>of</strong> <strong>the</strong> pr<strong>of</strong>it (from which pr<strong>of</strong>ittax compose 12.1%, labor tax <strong>and</strong> contributions 23.4% <strong>and</strong> o<strong>the</strong>r taxes 1.1% <strong>of</strong> <strong>the</strong> annualpr<strong>of</strong>it).One <strong>of</strong> <strong>the</strong> most important components <strong>of</strong> doing business is dealing with trading acrossborders, which is considered complicated <strong>and</strong> costly procedure especially for <strong>SME</strong>s. The costs<strong>and</strong> procedures involved in importing <strong>and</strong> exporting a st<strong>and</strong>ardized shipment <strong>of</strong> goods are <strong>the</strong>following every <strong>of</strong>ficial procedure for import <strong>and</strong> export involved is recorded – starting from <strong>the</strong>final contractual agreement between <strong>the</strong> two parties, <strong>and</strong> ending with <strong>the</strong> delivery <strong>of</strong> <strong>the</strong>goods. For export procedure 30 days <strong>and</strong> 7 documents (bill <strong>of</strong> lading, commercial invoice,customs export declaration, export license, packing list, technical st<strong>and</strong>ard/health certificate,transit document, <strong>and</strong> consignment note) are required. For <strong>the</strong> import procedure 24 days <strong>and</strong> 8documents (certificate <strong>of</strong> origin, commercial invoice, customs import declaration, customstransit document, packing list, technical st<strong>and</strong>ard/health certificate, terminal h<strong>and</strong>ling receipts,transit document, consignment note) are required.One <strong>of</strong> <strong>the</strong> components <strong>of</strong> doing business is enforcing commercial contracts. This isdetermined by evolution <strong>of</strong> a payment dispute <strong>and</strong> tracking <strong>the</strong> time, cost, <strong>and</strong> number <strong>of</strong>procedures involved from <strong>the</strong> moment a plaintiff files <strong>the</strong> lawsuit until actual payment. Theprocedures dealing with this issue are 50 <strong>and</strong> it is needed 285 days. Part <strong>of</strong> <strong>the</strong> business isclosing <strong>the</strong> business. It takes 1.9 years <strong>and</strong> 4% <strong>of</strong> income per capita to resolve bankruptcies.According to <strong>the</strong> WB annual report on “Doing Business in 2007”, among 176 countriesArmenia is on <strong>the</strong> following rank. 32 Table 20.No Doing Business Rank1 Ease <strong>of</strong> Doing Business Rank 392 Starting a Business 473 Dealing with Licenses 734 Employing Workers 485 Registering Property 27 Getting Credit 368 Protecting Investors 839 Paying Taxes 14310 Trading Across Borders 11811 Enforcing Contracts 6412 Closing a Business 4232 www.doingbusiness.org92