Different states have different goals by creating special economic zones (SEZ). In developed countries the aim is, primarily, technical re-equipment of production on the basis of new technologies, thus tax benefits are provided. In developing countries complementary to modernizing the economy foreign capital raising and involving advanced management experience are the top targets. Therefore, not only tax benefits are provided, but also incentives for leasing the land and the use of labor. According to the fact that tax and customs preferences in Russia are in the third place (after the public support infrastructure on the territory of the SEZ and the simplified mode of administration), we can draw a conclusion that Russia follow the developing countries traces. Today in Russia tax incentives combined with the customs regulation methods, public policy of infrastructure development and reduction of general administrative barriers. [1]
Russia adopted the policy of the establishment of SEZs significantly later than many states after realizing the significance of this trend for its own economic development. At the same time, it should be noted that in the XIX century by experience of Western countries Russia has made efforts to create the status of so-called "free port", providing duty-free storage of significant dimensions of the different products on their territories during the searching wholesale customers or in anticipation of the best implementation.
The global experience of successful operating SEZs in the late 80s attracted attention of the Russian reformers. Finally it was given the task to create a wide network of such areas during 2-3 years.
For 15 years the establishment and functioning of the zone were chaotic and haphazard. The reason for it was as the lack of legislative framework, as the constant struggle between regions and the federal government for the maximum benefits for free zones and for the right to take control over them.
But now the situation has dramatically changed and it is safe to conclude that since 2005 began a fundamentally new stage in the project of SEZ development in Russia. The beginning of new wave of SEZs connected primarily with the adoption of two basic laws. These laws laid the legal basis of SEZs establishment and functioning in Russia. It is formulated new principles of relations between business and government in such areas. It is important that a radically new system of tax and customs privileges was introduced for SEZs. [2]
At the present time in Russia it’s formed the normative legal base necessary for establishment and functioning of SEZs. It includes more than 50 laws and regulations. [3] Also it’s created a control system for this process consisting of the MED, and RusSEZ and Joint Stock Company "Special Economic Zones". Ministry of Economic Development of Russia - the main strategic instance exercising legal regulation in this area. RusSEZ (with its regional offices) - the main body of executive authority, which organizes and is responsible for this work. Joint Stock Company "Special Economic Zones" - the lead agency directly involved in SEZ infrastructure constructing.
Since 2009 a new phase of activity began in Russia – the period of active projection and construction of infrastructure facilities all over the SEZs. In the coming years the results of the first special economic zone will show how effective will be this tool for the economy diversification and whether it is worth actively spread throughout Russia. However, the first results of the industrial-processing zones inspire a fair share of optimism.
The idea of SEZs, involving building development by private investors, is the problem. In practice, the private investor prefers come when it’s all taped and the state have to make a construction. Such approach is pregnant with serious slowdown in construction. However, according to authorities, the decision will allow effective zones management at the level of the federation, making timely adjustments and assurance of infrastructure construction. [4] Such zones’ management scheme will significantly reduce time from decision-making to implementation.
To formulate some of the major problems associated with the creation and the activities of the SEZ in Russia, it is essential to consider the following.
Firstly, clearly formulated goals of creating certain zone, relevant both to the interests of the region and the federation, is often absent. The regional leaders, as a rule, see in such areas only short term benefits – the prospect of full or partial tax exemption. Many of them believe that the SEZs will help them to get rid of problems which can’t be solved because of poor infrastructure, the collapse of production, unemployment, severe social conditions and environmental problems. Nevertheless, international experience shows that the normal zone’s arrangement require huge investments.
It is also important that the free zone benefits system should be a tool for the implementation of the comparative advantages of the territory, rather than a mechanism of compensation gaps or missing factors of the development. Moreover, with the broad distribution of free zones in the world economy tax relief is not the main incentive for foreign capital inflows. More important may be such factors as political stability, investment guarantees, higher quality of infrastructure, qualified workforce, simplified administrative procedures. Secondly, it is clear that the creation and functioning of special economic zones should be governed by legislation, rather than by ever-changing and often ill-conceived sublaws.
Thirdly, SEZ’s management optimization requires a special federal body of state regulation with authorized powers and clear delimitation of the field of his competence with other regional and central authorities.
Fourthly, successful operation of a special zone requires a preparatory period, during which the production and economic infrastructure have to be created and portfolio of potential investment proposals has to be developed.
Fifthly, the vast majority of SEZs were conceived as integrated industrial zones focused on production, excluding real region location, its economy and the overall investment climate. It does not take into account the real costs for zone’s establishing and limited sources of financing in the country. [5]
Sixthly, in Russia the organizational status of zones provides hard access of goods and people to its territory. Without questioning the importance of customs control completeness in the SEZ, we note that some of the requirements set by the Federal Customs Service of Russia [6] are too restrictive. So, the law requires residents to build the fence around the company to install sophisticated security video systems, to equip checkpoints and special areas for customs control, provide customs by facilities despite the fact that residents are responsible for the safety of goods and vehicles displaced over the SEZs territory. For residents of the SEZs it means project appreciation and increasing payback period. [7]
Now some of these problems are already solved or are solving yet. But we should not stop here or completely close the project because, as you can see, SEZs is a complex management mechanism and the more complex the mechanism, the more effective it is.
Thus, for the successful functioning of SEZs in Russia you will need:
- To take an inventory of the national economy (of individual sectors, subsectors, companies and even types of products) in terms of investment cooperation and using its results to identify priority areas in which investors participation is the most desirable.[8]
- To work out a documented plan of development of each zone, which must show potential investors-residents investment profitability and high pay-pack in a particular area.
- To simplify administrative regime for relocated over the area goods, as stipulated in international conventions. Customs should not require the provision of more than one commercial or customs document in respect of imported or exported goods from the SEZs.
- To be limited by forms of control that sufficient to comply with customs legislation.
- To implement an assessment system of the tax incentives effectiveness. In the first stage it is need to take an inventory of the benefits provided to residents of the SEZs. In the second phase we should identify the budget losses from tax benefits. In the third phase we need to assess the fiscal and social impact of tax incentives. In the fourth stage we can assess the effectiveness of tax incentives by comparing the amount of budget losses (the sum of lost revenue), with the amount of fiscal or social effectiveness of tax incentives.[9]
According to the foreign and domestic experience organizational and legal regulation of business activity in the SEZs should be aimed at maintaining and ensuring equal access of businesses to the necessary infrastructure, at the protection of competition, at the introduction of special tax regimes, as well as at creating favorable conditions for attracting investment.
As in many countries around the world creating SEZs in Russia may be one of the most effective ways to attract foreign investment, a catalyst for the development of foreign economic relations and the economy as a whole. But the policy of its formation must be meaningful and consistent.
References
1. About requirements acceptance to the development, structure and planning of special economic zone, as well as conditions of access to the territory of the SEZ for the effectiveness of customs control. Order of the Russian Federal Customs Service dated on 09.08.2006 N 750.
2. Gordeeva O. V. Principles of effective tax regulation // Finance: monthly theoretical and scientific journal / Ministry of Finance of Russia. - M., 2010. - № 9. - P. 33-36
3. Lysova T. A. About concessional taxation of residents of special economic zones // Finance: monthly theoretical and scientific journal. - 2010. - № 11. – P. 73-75
4. Pavlov P. The second start of the special economic zones in Russia // World Economy and Inter-national Relations. - 2010. - № 8. - P. 69-75
5. Sidorenko. J. Special economic zones in Russia: Results and Prospects / J. Sidorenko, A. Klepikov // Problems of theory and practice of management. - M., 2010. - № 3. - P. 8-13
[1] Gordeeva O. V. Principles of effective tax regulation // Finance: monthly theoretical and scientific journal / Ministry of Finance of Russia. - M., 2010. - № 9. - P. 36
[2] Sidorenko. J. Special economic zones in Russia: Results and Prospects / J. Sidorenko, A. Klepikov // Problems of theory and practice of management: an international journal. - M., 2010. - № 3. - P.10-11
[3] Ibid, p. 11
[4] Sidorenko. J. Special economic zones in Russia: Results and Prospects / J. Sidorenko, A. Klepikov // Problems of theory and practice of management: an international journal. - M., 2010. - № 3. - P.12
[5] Ibid, p. 12-13
[6] About requirements acceptance to the development, structure and planning of special economic zone, as well as conditions of access to the territory of the SEZ for the effectiveness of customs control. Order of the Russian Federal Customs Service dated on 09.08.2006 N 750
[7] Pavlov P. The second start of the special economic zones in Russia // World Economy and International Relations. - 2010. - № 8. - P. 73
[8]Ibid, p. 70
[9] Lysova T. A. About concessional taxation of residents of special economic zones // Finance: monthly theoretical and scientific journal. - 2010. - № 11. – P.74 |
