From: Justin Burke (JBurke@sorosny.org)
Date: Tue Jun 20 2000 - 11:34:48 EDT
TCU-AZERI-BUSINESS
Azeri paper continues story of "circles of hell" awaiting aspiring
businessmen
In the second of its two-part feature "Circles of Hell", Azerbaijani
newspaper `Zerkalo' has continued its look at the trials and tribulations
faced by the country's would-be entrepreneurs. In this section the complete
start-up and running costs for a new business are listed and the
impossibility of making any kind of profit or living is demonstrated. The
following is the text of the article published by `Zerkalo' on 10th June
entitled "Circles of Hell - 2" by S. Sultanoglu; all capital letters as
published; please note 4400 manats equal one US dollar
We are continuing a series of publications about the tough life of our
country's businessmen. We should remind you that the first part of "Circles
of Hell" spoke about the problems that an individual has to overcome after
deciding to become a businessman when registering his business. Here is the
next stage.
Having gone through the cycle of "preliminary preparations" to join the
ranks of Azerbaijani businessmen and having passed all "the entrance
exams", the character in our investigation starts to implement his dream -
his shop opens.
He works hard from early morning till midnight, "attracting" clients. He
drives his car round the streets of Baku throughout the day, trying to find
the cheapest prices for the goods he needs in Baku's "wholesale shops".
[Subhead] Movable "robbery checkpoints"
Sooner or later he will attract the attention of traffic police officers
who, fulfilling their "service duty", put their movable "robbery
checkpoint" near every set of traffic lights and every intersection. Even
if you do not violate the rules, if a traffic guard notices that you have
goods in your car, you will have to part with 20,000-30,000 manats.
In this way we can start calculating a businessman's monthly "rent"
payments.
1. "Passage tax" to travel in in the city: 20,000 manats multiplied by 30
days makes 600,000 manats.
2. Tax for the shop's "inspector" at the sanitary epidemiological department
- 20,000-50,000 manats depending on the size of the shop.
3. Electricity payments - 400,000-500,000 manats.
4. "Night" guard - 50,000-100,000 manats.
5. A "tip" for the divisional police inspector - 50,000-00,000 manats.
6. Rubbish disposal - 20,000-50,000 manats.
7. Some 20,000-50,000 manats to an employee of the district executive
authorities if a businessmen has failed to "come to an arrangement with"
the latter.
8. Some 20,000-80,000 manats to a tax inspectorate "official", depending on
the range of goods in the shop.
9. Rent for the shop - a "rental" payment which does not depend on monthly
income - 100-300 dollars a month.
[Subhead] No profit can be seen yet
Our businessman needs to put some goods outside the territory of the shop
for sale them (this method of trade is widespread in Baku), i.e. to put
goods at the entrance and sell them in the street. He has to turn to a
trade "inspector" at the district police department for verbal but special
permission to do this.
In order to make the police "inspector" merciful, the businessman has to
undertake an obligation to make a guaranteed monthly payment of
300,000-400,000 manats.
He has to turn to the district taxmen for a street trading licence which
costs 150,000 manats for each counter or fridge placed outside the shop.
Thus, the businessman's "rental" payments are growing while there is NO
PROFIT YET.
Moreover, if he sells goods in the shop, he certainly has to take the
receipts from the cash register and give them to his clients almost by
force. Because if he "fails" to give a receipt, he will have to pay a
superfine of 1,500,000 manats the first time; and if he "is caught
red-handed" again, he will have to pay fines which increase in geometric
progression.
You must pay within 10 days, otherwise the inspector will come and "seal"
the shop until the fine is paid. This situation might occur repeatedly
during a month as taxmen from the tax service of the district, city and the
Tax Ministry are "watching over" the receipts.
The taxmen like to come to the shops and check the excise marks on vodka,
cigarettes, take an inventory of goods in the shop, trying to find out
whether the information on the till rolls conforms to the amount of sales
which is revealed by analysing the number of goods left over on the
counters. If they do not tally then another superfine has to be paid.
Then there is another "inspection", this time from the relevant department
of the city executive authorities, trying to find out whether there is a
food quality certificate. If not, another fine has to be paid. Wholesale
trade in the country is arranged in such a way that the bulk of goods come
into the trading system illegally via "shuttle" traders. Naturally, in
these cases there are no food quality certificates or producers.
The number of inspections is so enormous in Azerbaijan that in order to
systematize them in some way, the government decided by its resolution No 3
of 2nd March 1999 to force businessmen to buy compulsorily a registration
book for inspections - a "control book". Incidentally, the businessman
also has to pay 30,000-40,000 manats for this, but doesn't get a receipt.
Perhaps it is only in our "wonder country" where you can be inspected so
frequently that you are forced to buy a book for 10 dollars to register all
the "inspectors" there - a kind of "table to record the working time of
inspectors". And nobody asks whether you have the money to buy this "book"
or not. And so, our "businessman" is beavering away in this way every day,
week and month like crazy.
[Subhead] He who works hard does not eat.
The quarter ends and finally the trader has to report, at least to himself,
about his expenditures and what he earned to repay the credit he took from
the bank (see "Circles of Hell - Part 1) and to pay a profit tax to his
native state, on whose territory he has been working hard for three months,
with no holidays or recreation.
We said above that in order to start his own business, our businessman got a
bank loan of 57.2m manats by mortgaging his house which was estimated to be
worth 100m manats.
The paramount expenses of the Azerbaijani businessman to start up one shop
(items of expenditure)
1. Interest payments for "cashing" at the bank - two per cent - 114,000
manats.
2. Return of the sum of the "tax" credit paid for registering his firm at
the Ministry of Justice (the average cost is 200 dollars) - 880,000 manats.
3. Return of the sum of the credit of funds paid to the notary for
registering the credit agreement itself - 950,000 manats.
4. Official state duty for registering the firm at the Ministry of Justice -
110,000 manats.
5. Getting a stamp - 88,000 manats.
6. Getting the most ordinary and simple advertisement sign for the shop (the
average cost is 150-200 dollars) - 660,000-880,000 manats.
7. Official payment to the Baku executive authorities for "advertising" the
shop - 150,000 manats
8. Licence for trading outside (150,000 manats per month) - 450,000 manats.
9. Purchasing a cash register (average cost) - 1,760,000 manats.
10. Rent for the shop for one quarter (100 dollars per months) - 1,320,000
manats.
11. Purchasing shop windows for the shop (10 shop windows x 100 dollars) -
4,400,000 manats.
12. Purchasing two fridges for the shop (average price is 600 dollars x 2) -
5,280,000 manats.
13. Licence for selling alcohol and tobacco products - 300,000 manats.
This come to 22,750,000 manats or 5,170 dollars of NON-PRODUCTIVE expenses
within one quarter.
The businessman has already spent (22.7m manats), almost half the credit he
received from the bank, and he has only 34,450,000 manats left to buy
goods.
Let's assume that he buys goods using the whole sum of 34.45m manats and
starts "trading".
Let's look at the balance of his income and expenditure.
Let's suppose that our businessman does very well and the amount of goods he
sells in a quarter totals a sum equivalent to a 20-per-cent markup in the
first month, 40 per cent in the second month and 50 per cent in the third
month, i.e. the sum of his income makes up 37.895m manats.
And he has to pay:
1. VAT for three months which accounts for 16.67 per cent of the markup
itself - 6,317m manats.
2. Trade turnover tax (three per cent) - 1.03m manats.
3. Payments to the road fund (0.3 per cent) - 10,335 manats.
4. Costs for the delivery of goods to the shop (400,000 multiplied by three
months) - 1.6m manats.
5. Interest on the bank loan (average interest rate is 20 per cent per
annum) - 2.85m manats.
6. Salary for four shop employees (300,000 manats on average multiplied by
three months) - 3.6m manats.
7. Payments from the salary fund to the state social insurance fund (33 per
cent) - 1.188m manats.
8. Payments from the salary fund to the state employment fund (2 per cent) -
72,000 manats.
9. Fines, bribes and other unforeseen official and unofficial payments and
expenses - 4m manats.
Thus, he has expenditure of 20,391,375 manats!
The entrepreneur's profit, if we subtract this sum from the rest of the
banking credit, totalled only 17,503,625 manats or 3,978 dollars.
It is also necessary to pay one per cent of the profit to the state
invalids' fund, which totals 175,036 manats and profit tax (27 per cent) of
4,725,978 manats.
The remainder of the NET profit at the entrepreneur's disposal, as a legal
entity, will in this case total 12,601,600 manats or 2,864 dollars.
If the entrepreneur wants "to misappropriate" the remainder of the profit,
he has to pay income tax (35 per cent) - 4,410,560 manats.
Only after this will he legally earn a mere 8,191,040 manats or 1,861.6
dollars. We should remind you - IN A QUARTER!
[Subhead] From business to vagrancy
The whole of this sum will total approximately 14.5-15 per cent of the
capital invested. But our entrepreneur will have to pay THE MOST IMPORTANT
SUM OF THE BANK LOAN to the tune of 57.2m manats, as the bank gave the
credit for a period of three months and it is very difficult to get credit
in Azerbaijan for a longer period.
Thus, the businessman cannot return the bank loan. The creditor-bank takes
the mortgage - the entrepreneur's house and hands it over to real estate
agencies for sale in order to clear the debt.
It is not difficult to guess that thanks to this kind of "business", our
friend's wife walks out on him creating a scandal, taking the children, and
all his close "friends" and dear relatives turn their back on him as is
normally the case in Azerbaijani conditions. And our entrepreneur will
already be leading a vagrant's life without a flat, children, family and
friends.
After starting up his own business, creating jobs for four Azerbaijani
citizens and paying all his taxes to the state, the man who was thirsty to
work as a businessman and and willing to take a risk is back where he
started from with an uncertain future thanks to the very same state. We
have ONLY ONE LIFE.
[4,400 manats equals one dollar]
[For Part 1 see 'Zerkalo' (Baku, in Russian 13 May 00 p12): "Azeri paper
describes `circles of hell' awaiting aspiring businessmen"]
Source: 'Zerkalo', Baku, in Russian 10 Jun 00 pp 22-23
BBC Mon TCU 190600 km/ek/la
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