Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Tax Code Puts New Burden on Disabled

MTYelena Radchenko putting together a surge protector at the workshop run by Palmira.
ST. PETERSBURG -- Yelena Radchenko, 36, suffered almost total hearing loss at the age of 3 after taking a strong course of penicillin to treat pneumonia.

Later she graduated from a construction college and worked at a local design institute, but she was unable to carry out all aspects of her job because she had difficulties communicating.

Now, together with 100 other people with hearing problems, Radchenko works at Palmira, a private company run by the All-Russian Organization for the Deaf that produces a wide range of goods from electronic parts to T-shirts at five workshops in the north of the city.

"I like working here because I work with people who have the same problem I have. Therefore we understand one another better," Radchenko said as she nimbly assembled the components of a surge protector.

At Palmira, she earns about $80 a month, a welcome supplement to her $30 monthly disability payments.

But trouble looms for Radchenko and Palmira. The new Tax Code has abolished most of the tax breaks that Palmira and other companies that employ disabled people previously enjoyed.

Under the old Tax Code, companies where disabled employees made up at least half of the workforce were exempt from a range of taxes, including the 24 percent profit tax and pension and insurance taxes.

The new Tax Code was amended to combat widespread abuses of these privileges by companies that fraudulently acquired tax-exempt status, either by registering nondisabled workers as disabled or by hiring disabled workers and then not giving them anything to do.

Unfortunately, the many genuine companies owned by societies for the disabled are suffering from the changes to the code, too.

The All-Russian Organization for the Deaf, or VOG, operates 74 companies for deaf people nationwide. The All-Russian Society for the Blind, or VOS, operates 174 companies nationwide employing 90 percent of all the working blind people in the country. And the All-Russian Society for the Disabled, or VOI, runs about 3,000 enterprises employing about 32,000 disabled people.

Most of those enterprises are small, although there are some bigger ones in Nizhny Novgorod, Krasnoyarsk and other regional cities, said Lev Libman, a director at VOI's central office in Moscow.

Palmira general director Vladimir Ovchinnikov said the money these companies saved on taxes used to provide social support for their employees.

In Soviet times, the state provided apartments, sanatoriums and other facilities for the disabled, he said, and although these privileges were largely abolished after perestroika, companies like Palmira were still able to provide some material support and medical assistance to their employees.

When Palmira began paying the 24 percent profit tax and the 14 percent pension tax this year, it started losing money, however.

"Organizing a workplace for the disabled requires more resources, and the productivity of disabled workers is lower than that of able-bodied workers," Ovchinnikov said. "Therefore, we can't really compete directly with other firms without benefits."

Ovchinnikov said that Palmira had not yet laid anyone off but that it might have to if the situation doesn't change.

VOS enterprises face the same problem. The seven VOS companies operating in St. Petersburg saw their first-quarter tax burden rise to 37 million rubles (about $1.2 million) from 8 million rubles ($267,000) last year.

"It is disgraceful to impose such taxes on genuine organizations for the disabled," said Yevgeny Samarin, head of the St. Petersburg branch of VOS.

As well as having to pay more tax, the three societies for the disabled face additional burdens because tax-dodging companies that previously provided at least some income for disabled employees are now firing them.

The societies appealed to the State Duma last year, requesting a continuation of tax exemptions for the companies they run. But the Duma voted down the appeal.

"If the Duma doesn't change this decision, the [new Tax Code] could lead to the bankruptcy of companies employing the disabled," Samarin said.

VOS enterprises in St. Petersburg employ 1,700 blind people, while nationally the organization employs 23,000.

In St. Petersburg, 16.5 percent of the profit tax is earmarked for the city budget. However, the Tax Code also permits the regions to exempt "specific categories of taxpayers" from up to 4 percent of this tax.

Earlier this year, the city's legislative assembly voted to exempt companies run by disabled organizations from that 4 percent, but Governor Vladimir Yakovlev vetoed the move.

On April 3, the assembly passed the same bill a second time.

Natalya Yevdokimova, head of the legislative assembly's social affairs committee, believes that Yakovlev will not veto the bill again. But Yakovlev has yet to issue a statement on the matter, she said.

Yevdokimova said that on Feb. 21, she and a colleague also introduced another bill in the assembly that would require any company employing more than 30 people to meet employment quotas for the disabled. Companies failing to meet the quotas would instead make payments into a special fund to establish and modernize workplaces for the disabled.

Although the legislative assembly passed the bill, it was again vetoed by Yakovlev.

Meanwhile, Ovchinnikov suggested another way out of the impasse: an increase in state purchasing orders from companies employing disabled workers. In fact, there already is a law that 5 percent of state purchases must be made from such firms, but it is rarely followed.

Anatoly Pastukhov, head of the tenders department of the St. Petersburg Industrial Policy Committee, said a lack of state orders "is something that not only disabled organizations' enterprises but all companies can complain about."

Pastukhov said that his department merely oversees the process of distributing state orders and can only recommend that agencies consider disabled organizations' companies.

"The clients make the final decision on which contractor to use," he said.

"It's a fact that they got a little too relaxed enjoying the privileges that the Soviet system offered them," he added. "It's a different system now. It's capitalism."

Soviet societies for the disabled used to receive direct state subsidies. But in 1954 the subsidies were stopped and the system of tax breaks and mandatory state orders was introduced instead.

VOS and VOG in particular thrived under this system, receiving orders from state-controlled enterprises and building up an infrastructure for the disabled.

In St. Petersburg, there are 12,500 registered blind people, 13,000 registered deaf people and about 28,000 people with other disabilities. As well as the seven VOS companies, the city has two VOG companies and one VOI organization. In addition, some local firms, such as Baltiisky Zavod and Kirovsky Zavod, have policies on hiring disabled workers.

Still, their ability to compete on the job market is limited. Samarin said that just 5,000 blind people work at non-VOS enterprises in the entire country.

"The mentality of our organization toward the disabled is still inadequate," said Leonid Fionin, head of VOI's St. Petersburg branch. "You notice it particularly in offices, where such people are often not welcomed."

Workers at Palmira confirmed his view. "I'm really afraid of losing this job," said 53-year-old Nina Starinova, a machine operator who lives alone and supports herself on her wages and her disability allowance. "It is important for me both because of the money I earn and the communication with others it provides. This is my second home."