A return to progressive personal income tax in the Russian Federation: some estimations

Lyudmila N. Lykova

Abstract


This paper examines the possibility of reintroducing a progressive personal income tax in the Russian Federation and presents quantitative estimations of the possible outcomes of such a move. The main sources of statistical data for the analysis of distributions of taxpayers in terms of their income are considered (different resources of the Federal State Statistic Service and the Federal Tax Service statistics). The shortcomings of the existing statistical information were shown. Under the absence of officially published data on the distributions of taxpayers by income received, a lognormal distribution curve is simulated. The estimations of the distribution curve are based at the National Accounts data. Several systems of income tax brackets, rates and models of tax deductions are tested on these simulated data. The parameters of the tax burden shift onto the tenth decile of taxpayers and 1% of the highest-income taxpayers, a decrease in the decile ratio (in terms of disposable income) as well as changes in budget revenues according to tax scale options are estimated. The estimations show (1) none of the tested models of tax brackets, rates and deductions provides a principal reduction of the decile ratio (for disposable income); (2) a potentially significant reduction of the tax burden on the poorest groups of the population and the growth of the level of tax paid by high-income groups are possible; (3) it is possible to decrease the tax burden on the low income groups together with a rise of the budget revenue. The article concludes that it is necessary to test different variants of tax brackets, rates and deductions in real life circumstances and not on simulated data when progression in personal income tax is reinstated.

Highlights

1. The lognormal distribution curve based at the National Accounts data is generated to evaluate the distribution of PIT (NDFL) taxpayers in terms of taxable income

2. Testing of the different progressive tax models (brackets, rates and deductions) based on this lognormal distribution curve allowed to make quantity assessments of the possible shift of the tax burden onto the tenth decile of taxpayers and to1% of the highest-income taxpayers

3. It is demonstrated that the progressive tax rates make it possible to decrease the tax burden on the low income groups together with a rise of the budget revenue

For citation

Lykova L. N. A return to progressive personal income tax in the Russian Federation: some estimations. Journal of Tax Reform, 2018, vol. 4, no. 2, pp. 174–187. DOI: 10.15826/jtr.2018.4.2.051

Article info

Received June 12, 2018; accepted July 20, 2018


Keywords


Personal income tax, progressive tax scale, flat rate, lognormal distribution of taxpayers, tax burden, tax deduction

References


Batkibekov S. Reforma naloga na dokhody fizicheskikh lits v Rossiiskoi Federatsii kak instrument fiskal’noi politiki. Avtoref. Kand. Diss. [The reform of personal income tax in the Russian Federation as an instrument of fiscal policy. Cand. Diss. Thesis]. Moscow, 2002. 20 p.
2. Anisimova L., Kadochnikov P., Malinina T., Nazarov V., Sinelnikov-Murylev S., Trunin I. Reforma nalogooblozheniya dokhodov naseleniya v Rossii: rezul’taty v 2000–2007 godakh [Reform of the Personal Income Taxation in Russia: 2000–2007 results]. Moscow, IEPP Publ., 2008. 256 p. Available at: https://iep.ru//files/text/other/Nal_doh.pdf.
3. Sinelnikov-Murylev S., Batkibekov S., Kadochnikov P., Nekipelov D. Assessment of the results of income tax reform in the Russian Federation. Voprosy Ekonomiki = Issues of Economics, 2003, no. 6, pp. 61–77. (In Russ.)
4. Sinelnikov-Murylev S., Batkibekov S., Kadochnikov P., Nekipelov D. Otsenka rezul’tatov reformy podokhodnogo naloga v Rossiiskoi Federatsii [Assessment of the results of income tax reform in the Russian Federation]. Moscow, 2002. 120 p. Available at: https://www.iep.ru/files/text/usaid/podohod_nalog.pdf.
5. Chernik D. G. The tax mechanism against crisis. Menedzhment i biznes-administrirovanie = Management and Business Administration, 2015, no. 2, pp. 4–10. (In Russ.)
6. Mayburov I. A. Marking the centenary of income tax in Russia: theoretical analysis of key stages of the reform. Journal of Tax Reform, 2015, vol. 1, no. 2-3, pp. 161–176. DOI: 10.15826/jtr.2015.1.2.010.
7. Akhmadullin I. Progressive income tax as way and method of social justice. Upravlenie ustoichivym razvitiem = The management of sustainable development, 2016, no. 5, pp. 57–60. (In Russ.)
8. Karavaeva I. A strategy of the tax policy reforming for modern Russia: the innovative and social aspects. Vestnik Instituta ekonomiki Rossiiskoi akademii nauk = The Bulletin of the Institute of Economics of the Russian Academy of Sciences, 2014, no. 3, pp. 64–77. (In Russ.)
9. Panskov V. Progressive or Proportional Scale of Taxation: which is Fairer and More Effective? Ekonomika. Nalogi. Pravo = Economy. Taxes. Law, 2017, vol. 10, no. 2, pp. 105–112. (In Russ.)
10. Panskov V. The principle of justice in taxation: theory and practice. Finansy = Finance, 2015, no. 2, pp. 26–30. (In Russ.)
11. Pinskaya M. R. Approaches to understanding the tax equity. Journal of Tax Reform, 2015, vol. 1, no. 1, pp. 90–99. DOI: 10.15826/jtr.2015.1.1.006.
12. Lapov D. Progressive income taxation on natural persons as necessary element of anti-recessionary policy of Russia. Vestnik Instituta ekonomiki Rossiiskoi akademii nauk = The Bulletin of the Institute of Economics of the Russian Academy of Sciences, 2016, no. 2, pp. 200–212. (In Russ.)
13. Shinkareva O. N. Reforming of the income tax. Karelskii nauchnyi zhurnal = Karelian Scientific Journal, 2017, vol. 6, no. 4, pp. 305–308. (In Russ.)
14. Vakhtina M. A. Progressive taxation as a tool for providing the budget system stability. Aktual’nye problemy ekonomiki i prava = Actual Problems of Economics and Law, 2016, vol. 10, no. 2, pp. 68–79. DOI: 10.21202/1993-047X.10.2016.2.68-79.
15. Frank R. H. The Darwin Economy: Liberty, Competition, and the Common Good. New Jersey, Princeton University Press, 2011 272 p. (Russ. ed.: Frank R. H. Darvinovskaya ekonomika. Svoboda, konkurentsiya i obshchee blago. Moscow, The Gaidar Institute Publishing, 2013. 352 p.).
16. Duncan D., Sabirianova P. K. Switching on the Lights: do Higher Income Taxes Push Economic Activity into the Shade? National Tax Journal, 2014, vol. 67, no. 2, pp. 321–350. DOI: 10.17310/ntj.2014.2.02.
17. Emes J., Clemens J., Basham P., Samida D. Flat Tax: Principles and Issues. The Fraser Institute, 2001. Available at: https://www.fraserinstitute.org/sites/default/files/FlatTaxTxt.pdf.
18. Peter K. S., Buttrick S., Duncan, D. Global reform of personal income taxation, 1981–2005: Evidence from 189 countries. National Tax Journal, 2010, vol. 63, no. 3, pp. 447–478. Available at: https://www.ntanet.org/NTJ/63/3/ntj-v63n03p447-78-global-reform-personal-income.pdf.
19. Hall R. E., Rabushka A. The Flat Tax. 2nd ed. Hoover Institution Press, 2007. Available at: https://www.hoover.org/research/flat-tax.
20. Basham P., Mitchell D. Lessons from Abroad — Flat Tax in Practice. In: Clemens J. (ed.) The Impact and Cost of Taxation in Canada: The Case for Flat Tax Reform. Vancouver, The Fraser Institute, 2008. Pp. 103–148. Available at: https://www.fraserinstitute.org/sites/default/files/Flat_Tax_Lessons_From_Abroad.pdf.
21. Clemens J. (ed.) The Impact and Cost of Taxation in Canada: The Case for Flat Tax Reform. Vancouver, The Fraser Institute, 2008. 208 pp. Available at: https://www.fraserinstitute.org/sites/default/files/impact-and-cost-of-taxation-in-canada-2008.pdf.
22. Leigh A. Do Redistributive State Taxes Reduce Inequality? National Tax Journal, 2008, Vol. 61, no. 1. pp. 81–104. Available at: https://www.ntanet.org/NTJ/61/1/ntj-v61n01p81-104-redistributive-state-taxes-reduce.pdf.
23. Engel E., Galetovic A., Raddatz C. E. Taxes and income distribution in Chile: some unpleasant redistributive arithmetic. Journal of Development Economics, 1999, vol. 59, pp. 155–192. Available at: https://siteresources.worldbank.org/DEC/Resources/RaddatzTaxesIncomeDistributionJDE.pdf.
24. Borodkin F., Bragin V., Shpak M. Stability of income distribution in modern Russia (1994–2004). Prikladnaya ekonometrika = Applied Econometrics, 2006, no. 3, pp. 17–67. Available at: http://pe.cemi.rssi.ru/pe_2006_3_17-67.pdf. (In Russ.)
25. Gorlov S. K., Rodin V. A. Features of lognormal distribution and ascending scale of surtax in Russia. Vestnik Voronezhskogo instituta MVD Rossii = Vestnik of Voronezh Institute of the Ministry of Interior of Russia, 2012, no. 2, pp. 65–72. (In Russ.)
26. Kolmakov I. B. Forecasting of indicators of differentiation of monetary incomes of the population. Problemy prognozirovaniya = Studies on Russian Economic Development, 2006, no. 1, pp. 136–162. (In Russ.)
27. Suvorov A. V. Problems of assessment of differentiation of incomes of the population in modern Russia. Problemy prognozirovaniya = Studies on Russian Economic Development, 2008, no. 2, pp. 3–18. (In Russ.)
28. Zharomskiy V. S., Rudberg A. M., Ter-Akopov S. A. Methods of restoring the per-capita income distribution in large samples to generalized population levels. Voprosy Statistiki = Bulletin of Statistics, 2015, no. 6, pp. 12–25. (In Russ.)




DOI: http://dx.doi.org/10.15826/jtr.2018.4.2.051

Copyright (c) 2018 Lyudmila N. Lykova

eLibrary logoeLibrary logo  DOAJ logo ERIH PLUS logo 

© Journal of Tax Reform : ISSN 2414-9497 (online), ISSN 2412-8872 (print)