Last week the editors NEWSru.co.il asked our readers to ask questions on the issues of small and medium businesses in Israel Boris Schindler member of the Board of Directors and the head of the Russian headquarters of the «Movement for protection of rights of entrepreneurs».
Answers B. Schindler to questions.
1. I propose to introduce a single tax for small businesses and a simplified form of annual reports. In my opinion, it will allow the entrepreneur to drive the business. Do you agree with my opinion? Are you ready to promote this initiative?
This is a very difficult question, because tax payments of private entrepreneurs include the same components as that of the employees. However, employees do not pay VAT. In addition, the money that the entrepreneur transfers to the national insurance Institute is its contributions to future pensions and basic social rights, they do not relate to income tax payable to the state. I do not see how to combine all these taxes into one, as this will require numerous changes in laws and government organizations. So I don’t think our movement should engage in this.
Lack of SOCIAL protection (pensions, vacations, sick leave, unemployment benefits, etc.)
2. When and how will be solved the question of pensions for the owners of private businesses? In the future we are waiting for a paltry state pension, why pensions for salaried employees better thought out than for private entrepreneurs, who provide work to other people?
Elena Rybina, Natalia Cozarinsky, Marina Degtyareva, Mikhail, Marina
The problem of pension provision is extremely acute and complicated. Recently in the Knesset, submitted the draft law, in which private entrepreneurs want to oblige to save money for retirement over and above what they pay in «Leumi». This bill is currently under discussion and objection on the part of some entrepreneurs who prefer to do the pension accumulations not out of obligation, but by desire as it is today. Our movement will not allow the government to carry out unilateral steps that would prejudice private entrepreneurs. In the case of the bill on mandatory pension insurance we require you to provide them with the same tax benefits that receive wage earners, so the government actually encouraged us to do retirement savings and not forced. The main problem in this area is that the state provides to employees who delay retirement, more tax benefits than private entrepreneurs, and thereby encourages the latter to make savings. Entrepreneur in virtue of his position should take care of future pension, to pay fees and save money for pension savings. While contributions to pension program for employees at the request of the state do their employers. This is caused by the desire of the state to protect employees (because if the employer will not transfer the money into their pension funds, the profit will be higher), unlike private entrepreneurs, who themselves are employers. In addition, a certain proportion of the tax that the owners pay into the national insurance Institute is in the pension, so they too will be eligible to receive old age benefits upon reaching retirement age.
3. Concerned about social insecurity: the lack of payment of sick days, lack of government support in case of closure of business.
You are absolutely right. In recent years we have adopted many laws that protect worker’s rights at the expense of entrepreneurs-business owners. We have created our movement, to bring about a balance in the legislation and put the issue on the agenda of the leadership of our country. We say «Yes» to the social protection of employees, but demand equality, not to hurt the employers and from among private entrepreneurs. Right now we are working to lobby for the topic in the Knesset until the adoption of this law. For example, on 2 December, the Knesset held a conference lobby in support of private entrepreneurs, which represent the MPs Merav Michaeli («labor»), Moshe Gaffney («Jadot and Torah») and ofer the shely («Yesh Atid»). The meeting discussed, in particular, that the private owners pay taxes on an equal basis with employees (and sometimes more), but have no insurance, or elementary social rights protection instruments in case of bankruptcy of their business. At the same salary contributions from the private entrepreneur in «Leumi» tens of per cent higher than those levied on the employee. But when it comes to implementing social rights, it’s quite the opposite: employees entitled to sick pay, and no private owners. In the case of dismissal or change of residence of the employee, he is entitled to unemployment benefits, but the entrepreneur can’t even count on it if he has to close the case. For workers employed there are manual on a living wage and the negative income tax, which provide a minimum income and private owners, these benefits are not available. The calculation of the maternity allowance for women entrepreneurs is thus that only complicates their economic situation. Chairman of the Collegium of advocates EFI Nave, President of the Bureau of associations of private entrepreneurs Roy Cohen and the President of the Association of tax advisors Yaron Gindi pledged to combine their efforts and together with the «Movement for protection of rights of entrepreneurs» to achieve the equalization of social rights and responsibilities of private owners and hired workers.
4. When the Knesset will vote for a law allowing to receive the unemployment benefit in the case of closing a small business?
The law passed a preliminary reading in the Knesset. Now he must come to the financial Commission for further work on it. This law in its current form is problematic for entrepreneurs, so we do everything we can to fix it and make it more profitable for the owners of small and medium-sized businesses.
5. A lot was said about the social protection of entrepreneurs, and what has been done? Heard, there was a discussion about creating a Fund from the pocket of businessmen. Contributions to «bituach Leumi» and taxes from us for us not enough?
Armin van Buuren Eugene, 53, of Jerusalem
You very accurately conveyed the essence of the law on unemployment benefits for entrepreneurs, according to which the owners will pay the contributions to a new specially created Fund. In addition, under this bill, employers will be eligible for unemployment benefits only 3 times in my life, whereas to employees it can be assigned an unlimited number of times – provided that they have completed the required number of months before the dismissal. We promote several initiatives and legislation that will improve the situation for entrepreneurs in this field. Due to increasing life expectancy and growth of various payments to the national insurance Institute may in the future be in the red, therefore, the government wants us to Finance their unemployment benefits. We demand that the government not load us with new taxes and increased the size of the payments, and would help us because we are the engine of economic development of the country.
6. Why is there no coverage in case of illness, closure of the business, increased pension benefits, and there are no programs to support the opening and development of small business (e.g., tax credits, courses, etc.)?
Payment of sick days depends on the situation. If you are sick, say the flu, then you really are not supposed to, because the entrepreneur pays himself a salary. But if you, God forbid, get injured, we will be entitled to a benefit «DMA phia». The national insurance Institute pays its employees and private entrepreneurs, who have suffered in the workplace, as compensation for loss of wages or income (due to employment injury or occupational disease), provided that this person cannot do his former work and other suitable work for him (which must be confirmed by a medical certificate).
It is important to note that in this matter private entrepreneurs are also in unequal position with employees. Because last receive an allowance from the first day of incapacity, and lancers only with 12th. That is, if two painters, one of whom is a business owner, and the second his worker fall from a scaffold, and each one will break your arm and cannot work for 28 days, the employee will pay for the entire period, as a private entrepreneur, who got it to work – only 16 hospital days. This absurd situation, and we’re going to fight for her change.
There are many programs that are designed to help entrepreneurs start and run their business. Responsible for these programs Agency for small and medium business under the Ministry of economy.
Unfortunately, most information on this subject is not available in the Russian language, and this issue we are going to promote with the relevant authorities.
In addition, the Ministry of immigrant absorption provides new immigrants with support and loans on easy conditions to start a business.
7. I work as an employee and have a small private business. As an employee doing various deductions including retirement, plus the employer deducts a certain percentage. As private farmers regularly make tax payments, including in «Leumi», but count on a pension as a private trader can not. Although contributions to «bituach Leumi» a lot. Have to postpone retirement. Question: why «Leumi» not paying pension as a percentage of the employer, or in certain sizes depending on my deductions?
The mechanism of payments to the national insurance Institute is quite complicated. Especially if we are talking about a man who is both an entrepreneur and an employee. The idea is that in your case «Leumi» should combine all the amounts you have paid and submit them to the account of a pension which will be higher than the average private entrepreneur because you will have more money. The Israeli national insurance Institute today has to spend on various benefits, including old age, more than he gets. State every year he puts billions of shekels to make up for the shortfall in the funds required for benefits. Therefore it would be wrong to say that the state does not replenish our savings. In addition, it is important to note that employees also make savings in pension funds (partly by the employee and partially by his employer) and not in «Leumi». A business owner who wants to provide for themselves after retirement, needs to access pension scheme in the pension Fund in the status of «private entrepreneur» and save money in accordance with the level of their income. These contributions give a right to benefits and a decrease in payments for income tax and contributions to «bituach Leumi».
8. What happens to the business owner, if it hurts his child or himself? It turns out that these days he can’t earn at all, it is not possible to take sick leave. Not to mention the vacation. Private entrepreneurs are not entitled to a vacation. That is, of course, we can take leave, but no we will pay it off. Can I get help on this?
This is one of the biggest challenges entrepreneurs. The state’s position in this matter is: because we are their own employers, then you must pay yourself vacation pay and sick days. Therefore, entrepreneurs have no paragraph of the «days missed due to illness» in contributions to the national insurance Institute. There is only in the event of disability, extended illness, maternity leave and old age.
The movement for the protection of the rights of private entrepreneurs, supports a new bill proposed by Knesset member Moshe Gaffney (head of Finance Committee) and Merav Michaeli, who must solve these problems. The law proposes to give private entrepreneurs the opportunity to give itself a salary sheet is the same as getting from their employers employees. This amendment to the law will equalize the situation of private owners and hired workers, both in terms of social security contributions, and social protection provided by the national insurance (maternity allowance, unemployment or industrial injury, payment of reserve fees). The salary sheet will allow the entrepreneur to make social contributions and to receive payments on the same terms as that of the employees (pensions, compensation for dismissal and monetary compensation). Thus will be eliminated the discrimination that exists today in all that relates to the payment of vacation leave and reserve fees, and also will be able to collect unemployment benefits.
9. How to pay taxes and salaries to employees, if the work performed after the payment is released only after 60-90 days (especially when it comes from orders from government organizations.
Eskander, owner of the company by installing heating and cooling equipment
The system of deferred payments greatly complicates the life of private entrepreneurs and small businesses. Even more difficult is the situation, if firm goes bankrupt – after all, a businessman who worked for her as a freelancer, can obtain the advantage when collecting your «paycheck», even though he complied with their obligations as employees. An employee of the company automatically take precedence in the distribution of money, while the private entrepreneur is considered a «supplier» and fall into this category.
We were pleased to learn that the Knesset members were very interested in this issue, and currently there are several bills designed to solve.
In particular, it is proposed to limit the deferral of payments on the open market 45 days, and for organizations that are funded by the state, is 30 days, and set a fine of 25 thousand shekels for late payment more than 15 days. We hope that the bill will be passed in the final reading and will continue to address this issue.
10. Why in Israel there is a bad practice stitched checks?
To our great regret, this is one of the conditions of the free market. In Israel, there is an established custom not to pay in cash and defer payments to suppliers from a number of private entrepreneurs and small businesses. This creates a problem in cash flow, and business owners continue to «pass» it on, now postponing their payments to other partners. The sources of this problem is, first of all, the state itself, which considers it possible to pay their suppliers in 30 or 60 days after the receipt of services. We hope that this policy will change soon and the situation will improve.
THE COMMUNITY ORGANIZATION
11. Concerned about the disunity of people-entrepreneurs and organizations designed to aid and support small and medium businesses. What is being done to resolve this issue?
In fact, entrepreneurs usually choose his way, because of the fact that used to fix it myself. They don’t like on them, someone is. But there are several organizations dealing with private entrepreneurs. We are a popular movement that formed spontaneously in the network Facebook on the initiative of people who have decided enough is enough. Hired workers have the «Histadrut», the Union, considered one of the most powerful forces in the Israeli economy. Us – privates – it is very difficult to unite and to put forward their demands. Therefore, despite the fact that our movement is fairly new, we always act in coordination with other organizations, private entrepreneurs, to present a United front and show the government what it must with us be considered.
12. Another acute problem is the initial (starting) capital, without having to get into debt. Are there special funds, organizations, the business community, help to solve this problem? If Yes, then how to contact them? If not, are there plans to create such structures?
There are many programs that are designed to help entrepreneurs start and run their business. I mentioned earlier the Agency for small and medium business under the Ministry of economy, which is responsible for these programs. Unfortunately, most information on this subject is not available in the Russian language, and this issue we are going to promote with the relevant authorities. In addition, the Ministry of immigrant absorption provides new immigrants with support and loans on easy conditions to start a business. The opening and business planning also helps MATI – center for business initiatives.
13. There is a lack of legal information and assistance in legal support and business consultancy.
Tail poppies, owner of the consulting firm
What are the sources of legal information (in Russian). Are there any Russian-speaking forums, which discusses the business of building? Are there any companies that engage in consulting activities?
Many of the links provided above. There is also the Association of entrepreneurs of Israel.
14. There is not enough detailed and relevant information in Russian about what you have to pay taxes on what is liberation, what are the benefits for fuel or car. Where this can be found?
You are right. The tax administration website, unfortunately, does not have Russian version. However, all the necessary you can ask the auditor. We plan to address the issue of providing private entrepreneurs broader information in the Russian language.
15. Is it possible to organize online consultations on the website of the tax Inspectorate tax and legal framework? A huge amount of their information that it is impossible to understand without special education. For the budding entrepreneur there is no possibility to understand yourself.
You rightly noted that the topic of taxation is a very difficult and confusing. Now, unfortunately, there is no way to do something in Russian. One of the goals of Russian-speaking staff of our organization is the promotion of the interests of private entrepreneurs, speaking in Russian. We in particular, will require government agencies to provide information in Russian language. In the meantime, I recommend that you contact a professional tax consultant. They specialize in tax law and will help you understand this area.
16. Want to start a small business fixing computers. Want to know exactly what is required to avoid problems in the future? Where can I obtain such information?
Dmitry, to different types of businesses have different requirements. In General one can say that you need to obtain the status of «Osiek, Morse». To access it, you must contact the Department of taxation and VAT in their country of residence, and then in the national insurance Institute. In addition, you can consult with the auditor, who will help you in this process. Some activities require obtaining permits for the business, for example, when you open a restaurant or a Banquet hall. In this case, you should take additional action.
17. Where can I see the structure of the market? Are there any statistics types of business, research population? Where can I see the statistics on taxes?
This information is available on the website of the Central Bureau of statistics.
18. What information would you recommend to get for the money, and what for free?
Basic information about opening a business can be obtained from the office of income tax and VAT. Further advice (usually paid) on the calculation of taxes, accept the costs, financing and forms of Association to give the auditors and tax consultants. You can also contact the office of Agency on Affairs of small business in MATI – center for business initiatives and become a member of one of programs they support.
19. I am a civil engineer, I work as a foreman in construction from the contractor. In the past four years he opened his private business. Type of work – engineering consultancy. Have the extra money to 30 thousand shekels a year gross. After taxes remains very meager income. When the pension age (pension accumulation) am I eligible to receive a retirement benefit from «bituach Leumi» and keep your business? If no, what documents are needed to close a business? How long is it making (closing)? Do I have the right (after the closing of the business) earn one-time small amount and to deduct from this amount the taxes?
Yes, you can get the retirement benefit and in parallel to continue to work. The allowance will be administered in accordance with the income from the business the full amount or partial. Of course, if the income exceeds a certain ceiling (information on this can be found on the website of the national insurance Institute), the person may be deprived of the benefit, but it depends on different circumstances.
As for closing the business is a fairly simple process that not takes much time.
20. My friend in Ukraine its furniture plant, making the plant very high quality furniture that is in great demand. My friend offered to bring the furniture in its factory in Israel and sold here. What pitfalls can prevent this common cause? What taxes will need to pay for the import of furniture to Israel? The export of furniture from Ukraine also need to pay tax? What kind of trouble can be when the importation of goods in the ports of Israel? It be more reasonable to open a branch plant? Tips on how to more safely engage in such business.
To open such a business should receive detailed expert advice on import and export, and to develop a business plan. In General, the export of goods from the port are required to pay VAT for all the contents of the container. In addition, you need to pay to the inland revenue Department 12% of the goods value as import tax. That is, even before you start selling, you will already be spending, part of which then returns (a value added tax the seller will charge buyers).
Don’t know what other taxes you have to pay in the Ukraine. This business seems to me not problematic, but should also check the possibility of assembling the final product in Israel and the use of materials: please bring the legs, screws, countertops, etc. and assemble tables and other furniture here, instead of import from Ukraine of finished goods.
21. The Jews paid huge money for the lease and taxes (including city tax – «Arnon»), while the Arabs, for example the Arab-Bedouins in the South of the country, pay several times less. Why does the state allow such unfair discriminating between entrepreneurs of different nationalities?
The fact that the land tax – «Arnon» is charged with who is the actual user of the property, the local authorities and are spent to Finance various activities of these authorities. Types of real estate for which land tax is payable: buildings, agricultural land and so-called «carcass thus» – other types of lands in the territory of that local Council. The rates of tax are set by local authorities and differ in different localities. In the documents regulating economic activities in the country, identifies the minimum and maximum tax rates per square meter of land, compulsory for all local councils, from them they have no right to deviate. It is possible that cities and towns, «Arnon» in which is quite high, provides its residents a higher level of services. Therefore it would be wrong to say that the state creates this gap, as in the Jewish settlements, the land tax also may vary considerably, and in any case there are minimum and maximum limits, which cannot be violated.
22. Every trader is bound to make an inventory of his property, including, for example, the inventory of gold ornaments and electrical goods. Isn’t this excessive intrusion of the state into the private lives of citizens? How safe is the information that citizens are served?
Alexander, beer Sheva, 47 years, business architecture
Of course, in some cases, the state penetrates deep enough into our personal lives, but that is the law. All information contained in property returns of taxpayers filed with the tax authorities, is protected in accordance with applicable Israeli law.
23. I know that many Israeli businesses are subjected to racketeering by criminal structures. Businessmen are compelled to pay for the so-called guard, all under simulated legal payments. In case of refusal, destroy property, damage the equipment. The police to this phenomenon helpless, pointless to go there. Question: is there any hope for changing the situation?
The only body authorized to combat crime in Israel is the police. Our activities are aimed primarily at promoting the social rights of private owners, and we are not competent enough in this issue to deal with.