Putin Identifies Small Business As Tax-Base For Local Government

by Tatiana Smolenskaya, Tax-News.com, Moscow

13 November 2003

Whilst addressing the Congress of Municipal Entities in Moscow on Tuesday, Russian President Vladimir Putin stated that small and mid-sized business must underpin local government.

“There are a lot of opportunities here,” said the President, adding that the new Tax and Budgetary Codes were designed to “create stimuli for municipalities to expand their own tax-bases.”

Mr Putin observed that small and medium-sized businesses, particularly in the services sector, represented “the very segments of the economy to become decisive for the development of the internal market and for the economic growth of the country”.

The President also stressed that only “skilled and responsible local power” could properly address citizens’ problems. "We should not forget that this power exists at the expense of the tax payers, and it should be controlled by the citizens," commented Mr Putin.

While the President makes emollient speeches, the Tax Ministry is pressing the government to give it a range of police powers that only the Interior Ministry currently enjoys.

Tax Minister Gennady Bukayev says he wants his ministry to be able to "inventory taxpayers' property, interrogate witnesses [and] seize documents and objects."

Bukayev said a bill that would grant the ministry the powers it is seeking has already been drafted; but it has already encountered staunch opposition from the Economic Development and Trade Ministry, which said: "it would give tax authorities -- indeed, local tax authorities -- unprecedented powers."

Geoffrey Cox, co-founder of the European Business Club, said it would be better if tax officials spent their time "working out how to encourage businesses to pay taxes by making them easier to understand."

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