PowerPoint Presentation

Key Legislative Reforms - new property and organizational forms cont.

•Small Enterprises (malyye predpriyatiya)

–1989 Temporary Statutes on Small Enterprises

–August 1990 - Decree on Creation & Adoption of Small Enterprises

•Defined by # of employees: 15 in retail trade, 200 in construction

•Both laws allowed for separating off portions of existing state enterprises

•Greater operational and financial freedom than state enterprise parents

•1990 decree granted total tax exemption until beginning of 1991

•1990 decree allowed small enterprises to have access to centrally allocated inputs of parents state enterprises

–January 1991 federal law on taxation granted small enterprises preferential tax treatment.

•Small enterprise profits invested in labor training, new technology and capital improvements were exempted from taxes

•Initial 2-year tax holiday on profits from building materials manufacture, construction, consumer goods, and food processing

•75% of profit tax liability for first year and 50% for second year forgiven on profits from all other activities.

•Non-exempt Co-ops precluded from tax concessions on production of consumer goods

•One result – many Co-ops registered a “Small enterprises” in response to differential taxation and other legal provisions of small enterprises vs Co-ops.

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