Strategies of the Development of Entrepreneurship and SME

The same problem exists in getting credits mainly conditioned with absence of longtermloans, high interest rates, strict requirements of banks for getting loan etc.The most important part and at the same time the sharpest problem of doing businessin Armenia is paying taxes. It is conditioned by the number of taxes, duties that the companymust pay or withhold in a given year, as well as measures of the administrative burden inpaying taxes, which include the number of payments an entrepreneur must make; number ofhours spent preparing, filing, and paying and the high percentage of their profits they must payin taxes. The taxation system in Armenia consists of direct taxes, including those that spendupon the result of the taxpayer’s activities (land tax and property tax), indirect taxes (valueaddedtax, excise tax), as well as of payments substituting taxes (simplified tax, whichsubstitutes to value-added tax, income tax or profits tax for the taxpayers; fixed paymentswhich substitute to the value-added tax, excise tax and –for some of the taxpayers-the incometax and profits tax). In general there are 50 payments during the year have to deal with. Ittakes 1.120 hours to pay taxes, duties, which compose 36.6% of the profit (from which profittax compose 12.1%, labor tax and contributions 23.4% and other taxes 1.1% of the annualprofit).One of the most important components of doing business is dealing with trading acrossborders, which is considered complicated and costly procedure especially for SMEs. The costsand procedures involved in importing and exporting a standardized shipment of goods are thefollowing every official procedure for import and export involved is recorded – starting from thefinal contractual agreement between the two parties, and ending with the delivery of thegoods. For export procedure 30 days and 7 documents (bill of lading, commercial invoice,customs export declaration, export license, packing list, technical standard/health certificate,transit document, and consignment note) are required. For the import procedure 24 days and 8documents (certificate of origin, commercial invoice, customs import declaration, customstransit document, packing list, technical standard/health certificate, terminal handling receipts,transit document, consignment note) are required.One of the components of doing business is enforcing commercial contracts. This isdetermined by evolution of a payment dispute and tracking the time, cost, and number ofprocedures involved from the moment a plaintiff files the lawsuit until actual payment. Theprocedures dealing with this issue are 50 and it is needed 285 days. Part of the business isclosing the business. It takes 1.9 years and 4% of income per capita to resolve bankruptcies.According to the WB annual report on “Doing Business in 2007”, among 176 countriesArmenia is on the following rank. 32 Table 20.No Doing Business Rank1 Ease of 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