Life for Russia’s small businesses may become easier with the Government about to adopt a lighter taxation system for companies with annual sales below $2 million, and bigger firms access to a simplified 15% tax.

The latest tax initiative of Russia’s Economic Ministry may help more firms pay less to state coffers. However, that will still leave the majority of small and medium size enterprises paying up to 40% tax, according to Economy Minister Elvira Nabiullina.

”We need to admit that we failed to significantly ease the tax burden for small business, but we extended the possibilities of applying lower-tax schemes.”

Among other initiatives to help small companies are discounted prices for rent and electricity connection.

But Vladislav Korochkin, Vice President of the association of Small and Medium sized Businesses, says, excessive administrative barriers are the real drag on the sector.

”It’s a miracle that we sometimes have fresh food in the shops. It shouldn’t be there, because to collect all the permissions needed takes around 30 days. It becomes almost impossible for the smaller firms to supply products into retail chains. This is the main barrier for small businesses as it deprives them of distribution.”

This paperwork in the west takes hours, not weeks. And the Association says official and unofficial administrative payments can be as high as the tax burden itself. It adds that Government promises – to limit inspections to once every three years – can’t happen soon enough and that pressures from police and inspectors have actually increased in the past two months.