Echoing comments made by President Putin back in December, Prime Minister Mikhail Kasyanov said this past week that the government was extremely concerned over the fact that Russia’s small business sector was not flourishing, adding that the “unwieldy” system of small business taxation shared much of the blame for this. Kasyanov said the cabinet was considering doing away with the unified social tax on small businesses and replacing four others (the profits, value-added, sales and property taxes) with a single 10-percent tax for small businesses (a tax of 5-7 percent would be better still, he added). Kasyanov said he was certain that the State Duma would soon pass the amendments to the tax code necessary to simplify taxes on small businesses.

The prime minister also addressed the issue of Russia’s 13-percent flat-rate personal income tax–which, since it came into effect at the start of 2001, has made Putin a veritable poster boy for tax reform among some Western observers. Referring to Putin’s recent statement that the income tax would not be raised “in the near term,” Kasyanov said that what the president had in mind by “the near term” was a period as long as several years. Nevertheless, a certain “correction” in the tax system was necessary, Kasyanov added.

While the PM was obviously trying to soothe Russia’s taxpayers–some of whom fear that the 13-percent income tax was little more than a trick to lure them out of the shadow economy–it was not clear why they would find a promise to maintain it for just “several years” and hints that a tax “correction” was under consideration reassuring.