News

07.03.2017

Legal immunity

317

“Kazakhstanskaya Pravda”, 07th of March 2017, Doszhan Nurgaliev


Within the framework of institutional reforms, carried out in the country in accordance with the "100 concrete steps" of the nation's plan, the institute of Business Ombudsman was introduced a year ago, whose activities largely predetermined the positive changes taking place today in the sphere of government-business relations.

Overregulated field of activity


For many regions of Kazakhstan, including Astana, the tax payments of small and medium-sized businesses, as well as individual entrepreneurs, form the basis of budget revenues. The only exceptions are those regions where the lion's share of the local budget consists of subsoil users’ taxes. And, it would seem that all these sources, multiplying the budget of the country, should be of great value and determine the corresponding attitude to our "business bees", which could result in something more than just a tribute to the laws of physics. But in real practice, the relationship between business and government agencies sometimes has contradictory nature as the interaction of the index finger with alternating current in the electrical network.

In recent years, much has been done for doing business in Kazakhstan, and first of all, the inflow of foreign investment into the country, which has been appropriately evaluated by the world development institutions. So, in the Doing Business comfort rating of the World Bank, Kazakhstan took the 35th position among 189 countries in 2016. The best indices were achieved on such indicators as "Protection of minority investors" (3rd place out of 189), "Enforcement of contracts" (9th out of 189), "Registration of property" (18th out of 189), "Obtaining a building permit" (22nd out of 189).

But all these improvements, associated with the creation of "green corridors" for investors, do not yet give grounds to assert that the general business climate in our country has sharply improved and the ordinary entrepreneur on the ground feels comfortable and free. Not by coincidence the Head of State at an expanded meeting of the Government, quoted the results for 9 months of 2016, from which it appeared that the output of goods and services of SMEs decreased by 7%, the number of acting subjects decreased by 7%, and the number of employees by 3%, he criticized the country's achievements in the business climate reflected in the state bodies’ paper reports.

–There is such a saying - "the mountain gave birth to a mouse" ... Of course, the fluctuations in exchange rates have had their impact, but in reality, figures characterize the situation quite differently. How will they grow if the regulatory burden on the business increases all the time? In 2016 alone, about 6,000 various acts have been adopted that regulate business and the population", - said President Nursultan Nazarbayev.

In recent years, on the instructions of the Head of State, unprecedented measures have been taken in the country to improve the business climate, starting from a moratorium on inspections, legislative and other decisions, to large-scale financial support for businesses through state and sector development programs. In the framework of the Eurasian Economic Union, significant barriers in terms of access to the markets of partner countries were also lifted. Under the current sanctions, Kazakhstan's products could partly replace illegal imported food products from Europe and the United States on the Russian market, which is estimated at 350 billion dollars. But, unfortunately, domestic companies still can’t increase the volume of offers in this market due to the fact that their activities are so overregulated that traffic lights are absolutely necessary.

According to the data of the National Chamber of Entrepreneurship "Atameken", in recent years more than 12 thousand appeals of domestic businessmen have been received by NCE on issues of business protection. There are many complaints about violations of the rights of entrepreneurs. However, despite all the efforts of the National Chamber to stabilize this problem, nevertheless, as practice shows, only 40% of cases can be positively resolved.

In 2016, taking into account the practice of the OECD countries, the Institute of Business Ombudsman was introduced in Kazakhstan, which is accountable only to the President. By the order of the Head of State, Bolat Palymbetov was appointed the Commissioner for the protection of the rights of entrepreneurs. Today is exactly one year since the launch of this body, and it can be noted that over the past period of work, he has identified and brought to the agenda a lot of systemic problems of domestic entrepreneurship, including, among other things, the problem of phantoms of the economy – pseudo-entrepreneurship. The Ombudsman had to face this seriously criminal phenomenon right after visiting the regions and conducting meetings with entrepreneurs on the ground.

Where is the trick?..

The problem of pseudo-entrepreneurship used to occur in the economic practice of our country before, but as a rule, these "left" business movements get a wide scope during periods of economic difficulties, damaging the taxable base and the state budget as a whole.

As the Business Ombudsman notes, the main reason for the creation of false enterprises is well-known. It is the desire of business with a criminal nature to evade taxes. There are different ways. For example, to overstate the costs of acquired goods, works and services, or to legalize the resources that have entered the market illegally - smuggled and counterfeit products, raw materials and equipment or illegal labor. False enterprises are also used by companies - participants of public procurement. Thus, the organizers of such structures, as a rule, are the representatives of the business community, who through false enterprises divert considerable financial resources from taxation and inject into zones of legal circulation.

Of course, the reasoning behind the creation of false companies is their high profitability at relatively low costs, despite being more likely to be in the field of view of the supervisory authorities. Their incomes often range from 30,000 to 40,000 or more, while the return from such companies is almost zero. But if this did not affect other, then no one would talk about it. Judging by the extent of the growth of this "virus" over the last years, pseudo-entrepreneurship has become one of the significant challenges for domestic business in recent years.

In general, since the beginning of 2016, Atameken received more than 150 complaints on pseudo-entrepreneurship almost from all regions of Kazakhstan. Therefore, in 2016, the institute of the Business Ombudsman is focused on putting a barrier primarily where the feet of this problem grow - in the legislative sphere.

At the enlarged meeting of the Collegium of the General Prosecutor's Office Bolat Palymbetov supported the initiative of the National Chamber of Entrepreneurs "Atameken" to amend Article 215 of the Criminal Code "Pseudo-Entrepreneurship". In return, it is planned to introduce separate trains as in the Russian Federation: "Illegal formation of a legal entity" and "Illegal use of documents for the formation of a legal entity", that is, for counterfeiters. In Russian practice, such wording of the law allows you to identify quickly and to suppress at the registration stage, the evil intentions of the newly emerged Koreko and Polikhaevs with their pseudo-companies like "Hercules".

–Illegal acts of counterparts in the relationship with the pseudo-entrepreneur should be qualified as separate offenses - tax evasion, bank loans, fraud, with the obligatory conduct of appropriate checks", - says Bolat Palymbetov.

He is sure that with this approach the composition of the offense will be formalized, when it is enough only to prove the very fact of setting up an enterprise for a strawman, and the masks from the actors will be disrupted. In this case, the direct responsibility should be borne by a person who created such a company, used other people's documents, as well as those who intentionally gave them their passports for the creation of a false enterprise.

As a result of all the efforts made by the bodies for the protection of entrepreneurs 'rights, the Commissioner for the protection of the rights of entrepreneurs of NCE  “Atameken” and the Prosecutor General's Office in 2016 succeeded in stopping the prosecution of 101 bona fide businessmen who were victims of a pseudo-enterprise. Among them, there are fifty regional companies operating in the fuel and lubricants market, who found themselves in the epicenter of the scandal of pseudo-entrepreneurship last year.

–We are very grateful for the intervention of the Business Ombudsman in this problem, entrepreneurs were able to provide evidence of the validity of the transactions in the court", said Gazizbek Natbayev, deputy director of the Chamber of Entrepreneurs of South Kazakhstan region.

For these companies, their ordeals, obviously, have remained in the past. And as for the others, they may also be proved to be innocent if they found trapped in a similar situation by chance, and not by their own will. The fault of many entrepreneurs, as a rule, consists in the fact that they had the imprudence to enter into transactions with those companies that were recognized as pseudo entreprises by the fiscal authorities. But it's like putting a shadow on the fence. After all, how can an entrepreneur know in advance that the subject he is dealing with is a phantom company?

It is noteworthy that the exclusion of the article "False entrepreneurship" from the Criminal Code is supported by the Prosecutor General's Office. And now this work is close to its logical outcome.

Real support of entrepreneurship


In 2016, the Business Ombudsman focused on the numerous appeals of entrepreneurs, which often indicate an unreasonable criminal prosecution initiated by law enforcement agencies. As a result, their activities are virtually paralyzed in connection with the conduct of numerous investigative inspections and punitive measures on the part of state bodies, which tend to increase year after year. As of today, 61 agencies possess control functions in the republic - 45 on the central level and 16 on the regional one.

At the same time, the business sphere, as it was noted by the Head of State at the enlarged meeting of the Government, is overregulated, people are not allowed to open a business where it would seem that it is not only possible but necessary.

The President described these actions of state officials as "the fifth column", which was established in the executive and other authorities, and deliberately creates "fifth corners" on the path of domestic entrepreneurship.
According to the data of NCE "Atameken", entrepreneurs have to comply with more than 28 thousand requirements! At the same time, despite assurances about the ongoing cuts in the sphere of state control, in fact the situation in this plan remains unchanged, and cases of unreasonable oppression of business do not decrease, although the struggle with such remnants is, as we see, is at a sufficiently high level.

If again to operate with figures, only last year NCE and the Business Ombudsman received 5,235 appeals within the line of business protection, of which 2,198 appeals have been positively resolved or in the process of resolution. In addition, the property rights of entrepreneurs were protected in the amount of 28.9 billion tenge. These are illegally imposed fines and penalties, which in the end were abolished and returned to entrepreneurs, including business assets.

–Behind every criminal case is the fate of not only the entrepreneur himself, but also the enterprise and his employees. Investigations are conducted at an average of 90 days. And you can imagine when it lasts for up to a year! If you take into account that the entrepreneur treasures every hour, every day, then you can understand how all this has a destructive effect on business. The entrepreneur not only loses his business, but also reputation, partners and profit. And this is also a blow on entrepreneurship", - notes Bolat Palymbetov.

In general, the activity of the institute of the Business Ombudsman today sets a considerable impetus for activity to the central and regional bodies for protecting the rights of entrepreneurs. As it was noted by the chairman of the Council for the Protection of Entrepreneurs' Rights of Almaty region Baniyamin Fayzullin, in just one quarter of 2016, the Chamber of Entrepreneurs of the region received 117 appeals from the business within the line of the protection of their rights. Of these, 46 have been positively resolved today. As for 83 appeals, people were given explanations and provided assistance in drafting legal documents. During this period, the rights of entrepreneurs in the amount of over 428.8 million tenge were protected in the region.

Analyzing only a few moments of the multifaceted activity of the Business Ombudsman, I would like to note that this institute not only quickly conquers the trust of the business community of our country, but also shapes the appropriate legal worldview on the business environment, eliminating such a problem as legal nihilism - the cause of misunderstanding. This is very important, considering that in the future, domestic small and medium businesses will become a real driver of the national economy.

The new content of this activity is that now the problems of domestic business are solved at a higher level by holding personal meetings, working out solutions on topical issues affecting the interests of entrepreneurs. For example, a few days ago the Business Ombudsman brought to the agenda another acute problem related to the hidden raiding that takes place in the depths of some quasi-state structures.

In this regard, the Business Ombudsman suggested introducing monitoring of the activities of companies sold in the framework of privatization. In his opinion, this will save from the raid the companies that have bought shares in the public sector.
- This method of taking away business is already turning into a trend, which causes fear. This should not be in our practice", - he said at a meeting of the Council for the Protection of Entrepreneurs’ Rights and Combating Corruption of NCE Atameken.

Source: http://www.kazpravda.kz/fresh/view/pravovoi-immunitet/

«...Domestic business, the so-called national bourgeoisie, should be supported in every possible way, and those who prevent its development by unreasonable inspections, extortions, raids should be strictly punished...»

Statement from the President of Kazakhstan Kassym-Jomart Tokayev at an enlarged meeting of the Government on 15 July 2019

Zhursunov R.M.

Ombudsman for the Protection of the rights of Entrepreneurs of RK

The blog of the Ombudsman for the Protection of the Rights of Entrepreneurs of Kazakhstan was created for you to have an opportunity to appeal directly to me and I hope that it will contribute to a constructive dialogue between us – send me feedback, share opinions, make suggestions. All your comments without exception will be read by me.

Partners

Atameken
The General prosecutor's office of the Republic of Kazakhstan
service.pravstat.kz
www.e-gov.kz
Legal information system of Regulatory Legal Acts of the Republic of Kazakhstan