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. Last Updated: 07/27/2016

Report Finds Small Businesses on the Rise

The number of small businesses in Russia is surging and could soon reach West European levels, according a new report to be released Tuesday.

Earlier data from the State Statistics Committee indicating that small businesses were on the decline is incorrect, said the report, which was authored by the European Commission, the Russian Anti-Monopoly Ministry and Tacis, the European Union's technical assistance program to the Commonwealth of Independent States.

"The [committee's] figures didn't include information on individual entrepreneurs, who make up the largest part of small businesses," said Igor Mikhalkin, director of the Russian Small and Medium-Sized Enterprise resource center.

"The share of small enterprises is somewhat decreasing, but at the same time 230,000 more individual entrepreneurs are registered per year," he said, adding that previous reports also did not account for farming enterprises.

"You can see that there is a definite growth dynamic in this sector, and not the other way around," Mikhalkin said.

There were 843,000 small businesses, 262,000 farms and a staggering 4.5 million individual entrepreneurs in the beginning of 2001, the report said, or 37 small businesses per 1,000 people.

There are 40 to 60 small businesses per 1,000 people in the European Union.

Furthermore, a bill on small businesses that was passed by the State Duma in its third reading Monday should boost the number of entrepreneurs, said Anatoly Melnichenko, the head of the Tax Ministry's department for small business taxation.

The bill, which must pass through the Federation Council and be signed by the president, gives businesses with no more than 100 employees and a turnover of less than 15 million rubles ($477,000) per year a choice of paying 6 percent on revenues or 15 percent on profits.

"This will be much more convenient for [small businesses]," Melnichenko said.

"The number of individual entrepreneurs will skyrocket."

The report, however, warns that small business has not reached maturity and has yet to reach levels of efficiency comparable to European business.

Russian small business' contributions to gross domestic product and the federal and regional budgets is miniscule, the report says.

Small businesses account for only 8 percent to 10 percent of all the taxes paid in the country, Melnichenko said.

"But because of the appeal of the new taxes and the chance to get out of the shadows, we think that the number of businesses paying taxes overall will increase, and so will revenues," he said.

"But we mainly want to make life easier for small businesses; and since their input into tax revenues is small anyway, we could afford to lower tax levels," Melnichenko said.

The small business report is the first of its kind in Russia and is meant to emulate the European Union's observation of small businesses. The EU issues a report every four years on the subject.