Publication: Monitor Volume: 7 Issue: 111

Ivan Grachev, a State Duma deputy who chairs its commission on mortgage financing and also heads the private group “Development of Enterprise,” wrote in a newspaper this week that the “debureaucratization” measures the government is pushing fall short in a number of ways. He says that German Gref’s Ministry of Economic Development and Trade has, on the one hand, incorporated into its proposed legislation elements of legislation that Grachev and others drafted in 1997. These include measures that would restrict state agencies from carrying out inspections and/or audits of a given business more than once a year without authorization by a public prosecutor’s office or a court, permit representatives of business associations to be present during such inspections and audits, and require any official to pay compensatory damages for an inspection or audit carried out illegally and for the purpose of extracting a bribe. On the other hand, Grachev says, while some forty state and government bodies currently carry out such inspections and audits, only twenty-six will be subject to the new regulations. Fourteen, including the tax and customs services, will be exempt–meaning that inspectors from these agencies “will, as before, be able to appear at objects every day” and to do so on the flimsiest of pretexts. Grachev also claims that while the number of types of business activities subject to licensing will be reduced from some 300 to some 100, the government’s proposed amendments to the law on licensing in all other respects “works in the interests of the bureaucrats,” given that “their power to permit or not permit is widened even further.”

Taxes, Grachev asserts, act to restrict business activities even more than bureaucratic barriers. Under the current system, which he calls “antimarket,” businesses are subject to from thirty-five to forty different taxes. Yet, he claims, the government has thus far been in no hurry to change the existing system of business taxation. He predicts that the overall tax burden on businesses will only increase and that the government’s draft laws concerning taxes and business activities, taken together, “will have negative consequences for the economy.” The situation is only worsened, he adds, by the fact that members of the Duma’s budget committee are heavily dependent on the Finance Ministry, given that they need federal funds to fulfill specific election promises and thus will generally support the government’s revenue-raising efforts in exchange for Finance Ministry largesse. “The exceptions involve situations when oligarchical structures, who have their own people on the budget committee, block draft laws that are not beneficial to big capital,” Grachev writes. “It [big capital] will uphold its interests in any case, so that the overall situation will probably not worsen for it, unlike small and medium-sized businesses” (Vremya MN, June 5).