Study of Small and Medium Enterprises in Azerbaijan - IFC

More documents

Recommendations

Info

Box 5.2 Permits in the European Union The current permit system in Azerbaijan has two origins: 1. The rules and technical requirements governing permits which were elaborated during Soviet times and have not been brought in line with requirements of a modern market economy.; 2. During the past years, the government adopted a number of legal acts in order to regulate the development of a market economy. Consequently, the current permit system is characterized by inconsistencies due to lack of a systematic approach. This means that there is: 1. No clear definition of what constitutes a permit; 2. No exhaustive list of permits; 3. No defined procedures for issuance and revocation of permits; 4. No defined validity period of permits; 5. No defined cost for obtaining permits. Moreover, the lack of clear principles governing the permits system has led to the introduction of a number of permits from different government agencies without a clear legal basis and, which may conflict with the sound principles of the market economy. Box 5.2 shows an example of state regulation of permits in the European Union countries that sets up a balance between freedom of entrepreneurship, protection of the population, and state regulation 32 . Basics Permits in the European Union are based on risk management. Permits are used as a tool to protect consumer’s health and safety and to protect the environment. Constitutional court prevents abuses, overseeing the list of permits introduced by the state bodies. Overall constitutional principles: • Parliamentary law should define whether a specific activity requires a permit; • A permit can only be required and issued if envisaged by the law. Law defines key criteria: • Object and activities subject to permits; • Material and procedural criteria for issuing permits; • Responsibility of permit issuing bodies; • Fees associated with issuing permits; • Opportunities for appearing decisions and other legal measures in cases of denial or issuance delay (such as “silence is consent”). Types of permits: • Administrative preventive permits: i) as a condition to undertake and commence certain activity; ii) issued by a single decision of a public institution (e.g., environmental permits, construction permits); • Registration and notification system: i) individual decided whether he/she can meet the conditions of the law; ii) activity can be commenced after registration or notification; iii) public institution is entitled to control the fulfillment of the defined conditions and criteria and can prohibit to carry out an activity (i.e., catering services, retail food shops). 32 Based on materials of the conference “Permits and approvals in Entrepreneurship Activity,” Minsk, Belarus, December 20, 2006. 76 St u d y o f Sma l l a n d Me d i u m Ent e r p r i s es in Az e r b a i j a n
5.2 Permits coverage The Azerbaijani legislation does not clearly specify the number of government agencies entitled to issue permits, nor does it provide for the list of permits needed to carry out a business. As a result, government agencies can introduce permits sometimes independently and according to specific requirements. This leads to wide coverage of activities subject to permits, differentiated issuance procedures, different cost for issued permits and variable time periods for application review. According to the survey results, of the total of all the entrepreneurs who needed to obtain a permit in 2007 (81 percent of the total), 23 percent of individual entrepreneurs and 17 percent of SMEs required it for the start-up purposes (see Chart 5.1). This means that permits are needed not only to start a business, but also to continue activity. Since entrepreneurs are vulnerable if the permit is not issued or renewed, the permits issuance process opens the door for unofficial ways to solve issues and results in higher expenditure (see also section 5.4). Chart 5.1 The percentage of entrepreneurs needed permit in 2007 (% of respondents) 30% 25% 20% 15% 23% 17% 10% 5% 0% Individual entrepreneurs SMEs According to survey results, the Ministry for Emergency Affairs, the Ministry of Taxes, and the Ministry of Labor and Social Protection cover the large majority of permits (see Chart 5.2). Many normative legal acts that regulate the issuance of permits sometimes are not thoroughly examined. There are many cases in which different government agencies demand double requirements from entrepreneurs. Double regulation is observed in the form of “certification + permit issuance”. This requirement forces entrepreneurs to obtain a permit for the action or product which that has already undergone the certification procedure. In these cases, one agency could take over both of these instructions. The Law on Foodstuff 33 is a vivid example of double requirements (see Box 5.3). 33 The Law on Foodstuff, dated November, 18 1999, No. 759. Aze r b a i j a n Bu s i n e s s En a b l i n g En v i r o n m e n t Pr o j e c t 77
Page 1 and 2:
Study of Small and Medium Enterpris
Page 3 and 4:
Study of Small and Medium Enterpris
Page 5 and 6:
5. Business Permits................
Page 7 and 8:
Foreword and Acknowledgements IFC,
Page 9 and 10:
critically examines all areas of op
Page 11 and 12:
of each formality. Special attentio
Page 13 and 14:
Policy Recommendations Business Reg
Page 15 and 16:
Problems Sources of Problem Recomme
Page 17 and 18:
Page 19 and 20:
Business Taxation Problems Sources
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Capital: Baku Country’s populatio
Page 27 and 28: The state, ultimately responsible f
Page 29 and 30: 1. Methodology 1.1 Background The s
Page 31 and 32: the share of economically active co
Page 33 and 34: Scope of activity Official statisti
Page 35 and 36: 2. SMEs in Azerbaijan The aim of th
Page 37 and 38: Meanwhile, the number of small and
Page 39 and 40: Table 2.2 Statistical information o
Page 41 and 42: The “typical” small enterprise
Page 43 and 44: According to the IFC survey, more t
Page 45 and 46: 2.5.3 Legal disputes Most entrepren
Page 47 and 48: 3. Business Registration In January
Page 49 and 50: According to the law previously in
Page 51 and 52: 3.4 Economic impact estimate Accord
Page 53 and 54: tion duplicate is addressed to the
Page 55 and 56: the local tax inspectorate for regi
Page 57 and 58: 3.10.3 Introduce the electronic reg
Page 59 and 60: 3.10.7 Simplify the liquidation pro
Page 61 and 62: Business registration before ‘one
Page 63 and 64: Process map of one-stop-shop busine
Page 65 and 66: Registration for individual entrepr
Page 67 and 68: 4.1 Licensing: the legal framework
Page 69 and 70: Chart 4.1 Number of activities requ
Page 71 and 72: While the Rules specify limits for
Page 73 and 74: Chart 4.6 Economic impact of licens
Page 75 and 76: Annex 4.1 Checklist of issues for d
Page 77: Based on the IFC survey estimates,
Page 81 and 82: Box 5.4 An example of overlapping p
Page 83 and 84: 5.4 Permit expenses Azerbaijani leg
Page 85 and 86: Chart 5.9 40% Average percentage of
Page 87 and 88: 2.4. Specifying in the law a unifor
Page 89 and 90: Annex 5.1 Procedure for obtaining c
Page 91 and 92: Annex 5.2 Checklist of issues for d
Page 93 and 94: The most significant legal act in i
Page 95 and 96: 6.1.2 There is no effective mechani
Page 97 and 98: 6.1.4 Entrepreneurs are not aware o
Page 99 and 100: IFC’s analysis showed that only h
Page 101 and 102: 6.2.2.1 The inspections process and
Page 103 and 104: View from an entrepreneur: “The s
Page 105 and 106: Chart 6.11 Average registration in
Page 107 and 108: going in the opposite direction. In
Page 109 and 110: clearly defined circumstances, or a
Page 111 and 112: Annex 6.2 Presidential Decree No. 7
Page 113 and 114: The bulk of individual entrepreneur
Page 115 and 116: Items 1-9 are collected at the firs
Page 117 and 118: The IFC survey reveals that one in
Page 119 and 120: Table 7.5 Main tax obligations of a
Page 121 and 122: Chart 7.3 IFC Survey: Complexity of
Page 123 and 124: 7.3.2 Tax inspections negatively af
Page 125 and 126: 7.3.5 The cumbersome VAT administra
Page 127 and 128: • Introducing clearer and more el
Page 129 and 130:
Chart 8.1 Development of Credit Ins
Page 131 and 132:
More than 90 percent of entrepreneu
Page 133 and 134:
Chart 8.9 The loan interest rates o
Page 135 and 136:
Case study of a Baku-based glass an
Page 137 and 138:
View from a bank employee: “One p
Page 139 and 140:
Box 8.2 Examples of a successful cr
Page 141 and 142:
Box 8.3 Examples of alternative mec
Page 143 and 144:
9. Foreign Trade The volume of fore
Page 145 and 146:
Box 9.1 Customs regimes under the C
Page 147 and 148:
As Chart 9.1 illustrates, 98 percen
Page 149 and 150:
Table 9.1 A comparison of the proce
Page 151 and 152:
The comprehensive system of mandato
Page 153 and 154:
Table 9.2 Average costs for imports
Page 155 and 156:
Box 9.5 Customs payments The Custom
Page 157 and 158:
Box 9.8 An excessive number of docu
Page 159 and 160:
Moreover, due to the underdeveloped
Page 161 and 162:
Expected impact More comprehensible
Page 163 and 164:
9.5.6 Accelerate WTO accession of A
Page 165 and 166:
Chart 9.5 Goods importable upon app
Page 167 and 168:
Azerbaijan has been long pending a
Page 169 and 170:
List of Laws 1. The Tax Code of the
Page 171 and 172:
Statistical Annexes Aze r b a i j a
Page 173 and 174:
Chart A1.3 Individual Entrepreneurs
Page 175 and 176:
Chart A1.7 Individual Entrepreneurs
Page 177 and 178:
Chart A1.14 Three Major Types of Ob
Page 179 and 180:
Registration Chart A2.1 Entrepreneu
Page 181 and 182:
Chart A2.8 Three Major Problems Occ
Page 183 and 184:
Chart A3.3 Existence of Licenses by
Page 185 and 186:
Chart A3.9 Three Major Obstacles to
Page 187 and 188:
Chart A4.4 Obtaining of Any Permits
Page 189 and 190:
Chart A4.10 Time Required to Obtain
Page 191 and 192:
Chart A5.4 Application for Credit o
Page 193 and 194:
Chart A5.12 Average Interest Rate (
Page 195 and 196:
Chart A6.3 Entrepreneurs That Under
Page 197 and 198:
Chart A6.8 Authorities That Made In
Page 199 and 200:
Chart A6.13 Breakdown of Number of
Page 201 and 202:
Chart A6.19 Average Duration of One
Page 203 and 204:
Chart A6.25 Small and Medium Enterp
Page 205 and 206:
Chart A7.3 Small and Medium Enterpr
Page 207 and 208:
Chart A7.8 Reported Share of Busine
Page 209 and 210:
Chart A8.3 Usage of Optional (not c
Page 212:
Azerbaijan Business Enabling Enviro
show all

Study of Small and Medium Enterprises in Azerbaijan - IFC

Create successful ePaper yourself

Delete template?

Save as template?