“The easiest way to creation of small business is buying medium business and waiting with patience…”
No one knows who the author is
This joke was posted in a Russian web site. No one knows who the author is and what his/her nationality is. Whoever he is, it is clear that the author’s country is in the same situation as Armenia. In other words, in his country there are all conditions for forcing businessmen to bankruptcy, it is just that they need some time for that. However, everyone in Armenia (mostly authorities and officials) are speaking of supporting small and medium businesses.
The A1+ TV channel organized a TV program, during which they discussed the conditions of small and medium businesses in Armenia. Officials involved in small and medium businesses were participating in the discussion s well. It turned out that everyone came to the conclusion that small and medium businesses cannot bear the competition with large businesses and, for example, small shops close down because of large supermarkets.
The state officials in fact did not refuse the fact that it was true. However, they were explaining that it is characteristic to a market economy and people should not be afraid of that. Certainly it is true from the prospective of the market economy logic. Classically in a market economy the state has nothing to do in the market economy. The companies compete and some may win and others may lose. It means that a real market is a place where some win, and others lose, and if you lose nobody will save you.
However, in countries where the market economy and capitalism idea came up, they understood that it would not be the true way. Even from the moral point of view. In other words, they should not let some companies to collect millions and others go down. Thus, those countries started to intervene in the economy in order not to let inequity and polarization in the economy (because it would have political consequences too). By using different tools such as budget mechanisms and different policies to small and medium businesses the governments of those countries started to support their economies.
What is happening in our country? When a large business is gloating small businesses, it is totally legal and is within the logic of market economy. This means that our officials advice us not to worry about it because this is the way it happened in other countries as well and we need time to overcome this phase too. “It is a market economy; in Armenia simply most of people have the Soviet mentality and cannot adapt to the rules of market economy,” say the officials.
However, this is a typical cynicism. First, we don’t have a market economy and it is still in the phase of formation for over 20 years with its negative consequences. This means that it is about the mechanism of merging others and taking small businesses. Second, if it is normal that small businesses cannot stand the competition of large ones and are lost, what is the role of the state in economy?
The most loved expression of state officials is that in Armenia companies do not like paying taxes. It is true. However, it is true too that even in developed countries companies do not pay taxes with pleasure. The difference is that if the main reason in the West for escaping from paying taxes is the willingness to make more money, in our country there are other reasons too. First, the situation is that everyone is hiding incomes. And if someone tries to stray from these rules and work fairly, he/she will meet bankruptcy. Second, in Armenia taxpayers do not know where the money they pay as taxes goes. In normal countries taxes are spent on state needs, but it is hard to believe in it because a state official who receives 100,000 drams salary becomes a millionaire.
When the government is told to reduce the tax rates, they are bringing an argument that they will have problems with tax collection. This proves that in Armenia not the budget serves for the economy, but the vice versa.
Of course we can bring the example of Georgia, where the tax rate reduction resulted in growth of the tax incomes. Even more, the Georgians continued the reforms and as a result created an ideal environment for business and investments for small and medium businesses. Currently companies that have up to 16,000 money circulation a year are free of taxes. For businesses having up to 55,000 dollars circulation the VAT is 3-5%. The IT sector if almost fully free of taxes and the entire territory of Georgia is an economic zone for them.
When the Armenian officials are asked to follow Georgia’s example, they say that the Georgians enjoy the support of the Americans, and if we had the same support, we would succeed too. Why does not anybody help Armenia? Why do not Russians help Armenia? Why don’t we turn with the face to the West if their support can develop our economy too and why their money is spent on developing different strategies only?
Generally when we talk to the officials responsible for small and medium businesses the impression is that their job is not supporting small and medium businesses but convincing us that the small and medium businesses do not need support. If the small and medium businesses do not need help, it means that the institutions and all staff for that purpose are useless and should be closed down. Accordingly, the money provided by the budget for the mentioned people and institutions can be spent on supporting large businesses.