I.A. Klepitskiy

Starting a Business: Risk of Penalties

2020. No. 2. P. 130–161 [issue contents]
The risks of penalties for doing business without registration and for unauthorized businessactivities are different in the legal systems of different countries. Russia establishescriminal or administrative liability for illegal business activities as a crime in itself. Inthe United States, the United Kingdom, France and Germany criminal or civil penaltiesgenerally apply for tax evasion or failure to pay for social insurance. The peculiarity ofFrench law is the use of astreinte to force business registration. This approach seems tobe more effective in the context of business withdrawal from the shadows, but it raisesapprehension in the context of the entropy of the legal system. Carrying out unauthorizedactivities in Western legal systems entails criminal or civil penalties regardless of thesize of the income. The type of activity and other circumstances are taken into account.Over the past decade, registration systems for the final beneficiaries of legal entitiesare being introduced everywhere. The comparative study leads to the conclusion thatpunishment (both criminal and administrative) for engaging in commercial activitieswithout registration is not an effective tool for getting business out of the shadows. Britishrules seem more successful. In England and Wales the obligation to notify tax authoritiesof the facts arises as the business succeeds, reaches a certain level of income or profit.Responsibility is provided for tax evasion, and failure to act does not entail a criminalcharge. Russian legislation on licensing activities loses consistency and becomes difficultto foreseeable, its revision is necessary. The question of sanctions (criminal or otherwise)for unauthorized activities should be decided not on the base of the amount of income,but on the base of the danger that the activity poses to others. Registration systems forbeneficial owners entail dubious benefits and are fraught with additional problems.
For citation: Klepitskij I.A. (2020) Starting a Business: Risk of Penalties. Pravo. Zhurnal Vysshey shkoly ekonomiki, no 2, pp. 130–161 (in Russian) DOI: 10.17323/2072-8166.2020.2.130.161
Citation: Klepitskiy I. (2020) Nachalo biznesa: risk nakazaniya [Starting a Business: Risk of Penalties]. Pravo. Zhurnal Vysshey shkoly ekonomiki, no 2, pp. 130-161 (in Russian)
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