Budget Tax Revenues and Losses from External Labor Migration in Russia

Maria O. Kakaulina

Abstract


One of the reasons behind declining budget revenues can be external migration. This article aims to describe the methodology for estimation of tax losses and revenues from international labor migration for specific types of taxes. Changes in personal income tax revenues are estimated by using the data on the number of labor emigrants (immigrants) for specific occupations, nominal gross monthly wage of employees in this occupation in Russia, standard child tax deductions and the corresponding personal income tax rate for residents (non-residents). Changes in VAT and excise tax revenues caused by the current trends in labor migration are estimated in accordance with the structure of household consumption. The amount of tax revenues (and losses) is calculated as the product of the sum of VAT and excise tax payments made by one member of a household per year when buying goods, works and services on the territory of Russia, and the number of emigrants (or immigrants). The research uses the data provided by Rosstat, Federal Tax Service of Russia and the Analytical Centre under the Government of the Russian Federation for 2012–2017. The conclusion is made that international migration has a negative impact on the tax revenues of the country’s consolidated state budget. Although, throughout the whole of the given period, the balance of additional revenues from VAT, excise taxes and the personal income tax (PIT) on earned income and budget losses from these taxes remained positive, in absolute terms, this balance decreased significantly. Trends in international labor migration affected the balance of tax losses and revenues. Therefore, the government’s attempts to target international labor migration by reforming the tax legislation seem quite reasonable: the upcoming tax reforms will include the introduction of the concept ‘centre of vital interests’ as the second criterion of residence and equalization of the PIT rate for tax residents and non-residents. The proposed methodology can thus prove to be an effective tool for the Federal Tax Service of Russia to estimate the resulting changes in tax revenues as well as other changes related to labor migration processes.

For citation

Kakaulina M. O. Budget Tax Revenues and Losses from External Labor Migration in Russia. Journal of Tax Reform. 2019;5(3):190–203. DOI: 10.15826/jtr.2019.5.3.067

 Article info

Received August 23, 2018; Revised October 1, 2019; Accepted November 29, 2019

 


Keywords


tax losses, tax revenues, budgetary effect, international population migration, labor migration, consumer spending, immigration, emigration

References


Trubin V., Nikolaeva N., Myakisheva S., Khusainova A. Migration of Population in Russia: Trends, Problems and Solutions. In: Social Bulletin of the Analytical Centre under the Government of the Russian Federation. 2018, May. 54 p.
2. Maslennikov V. V., Linnikov A. S., Maslennikov O. V. The estimation of losses of the Russian economy from population migration to other countries. Finansy: teoriya i praktika = Finance: Theory and Practice. 2018;22(2):54–65. (In Russ.). DOI: 10.26794/2587-5671-2018-22-2-54-65
3. Iontsev V. A., Ivakhnyuk I. V. Labor migration in the SES: analysis of the economic effect and institutional and legal implications of ratification of agreements in the field of labor migration. St. Petersburg: Centr integracionnyh issledovanij Evrazijskogo banka razvitija; 2012. 60 p. (In Russ.).
4. Koretskaya-Garmash V. A. The Use of Migrant Labour – Threat or Advantage for Russian Economic Development. Economy of Region. 2016;(2):471– 484. (In Russ.)
5. Ryazantsev S. V. Contribution of Labour Migration to the Economy of Russia: Evaluation Methods and Results. Bulletin of the Financial University. Humanitarian sciences. 2016;22(2):16–28. (In Russ.)
6. Aleshkovsky I. A., Grebenyuk A. A., Maksimova A. S. Methodological approaches to assessing the impact of external labor migration on the financial and budgetary sphere of the host countries. Finance: theory and practice. 2018;22(6):69–81. (In Russ.) DOI: 10.26794/2587-5671-2018-22-6-69-81
7. Sriskandarajah D., Cooley L., Reed H. Paying their way: the fiscal contribution of immigrants in the UK. Registered Charity No. 800065, Institute for Public Policy Research; 2005.
8. Kerr S. P., Kerr W. R. Economic Impacts of Immigration: A Survey. Working Paper 09-013, Harvard Business School; 2011.
9. Preston I. The Effect of Immigration on Public Finances. Discussion Paper Series CDP No 23/13, Centre for Research and Analysis of Migration; 2013.
10. Dumont J. С., Liebig T. Is migration good for the economy? Migration Policy Debates. Paris: OECD Publishing; 2014. Available at: https://www.oecd.org/migration/OECD%20Migration%20Policy%20Debates%20Numero%202.pdf [Accessed: 24.11.2019].
11. Hansen M. F., Schultz-Nielsen M. L., Tranæs T. The Impact of Immigrants on Public Finances: A Forecast Analysis for Denmark. IZA Discussion Papers 8844, Institute of Labor Economics (IZA); 2015.
12. Blau F. D., Mackie Ch. The Economic and Fiscal Consequences of Immigration. A Report of The National Academies of Sciences, Engineering, and Medicine, Washington, DC: The National Academies Press; 2016. DOI: 10.17226/23550
13. Orrenius P. New Findings on the Fiscal Impact of Immigration in the United States. Working Paper 1704, Federal Reserve Bank of Dallas; 2017.
14. Kancs d’Artis, Lecca P. Long-term social, economic and fiscal effects of immigration into the EU: The role of the integration policy. The World Economy. 2018;(41):2599–2630. DOI: 10.1111/twec.12637
15. Savelenko D. V. Predictive assessment of socio-economic consequences of labor migration in Russia. Modern problems of science and education. 2014(6). Available at: https://science-education.ru/ru/article/view?id=15284 [Accessed: 10.11.2019]. (In Russ.)
16. Neklyudova N. P., Ilinbaeva E. A. Evaluation of loss from the region budget caused by illegal labor migration (on an example of Sverdlovsk region). Tomsk State University Journal of Economics. 2017;(37):206–215. (In Russ.) DOI: 10.17223/19988648/37/15
17. Yakovleva Y. B., Kuznetsova N. P., Drozdov O. A. External labor migration in the context of marketing research (evidence from Russia). Innovative Marketing. 2019;15(1):30–41. DOI: 10.21511/im.15(1).2019.03
18. Kakaulina M. O., Methodology for assessing tax losses of regional budgets from illegal labor migration in Russian Federation. St. Petersburg State Polytechnical University Journal. Economics. 2019;12(5):142–151. DOI: 10.18721/JE.12511
19. Palivos T. Welfare Effects of Illegal Immigration. Journal of Population Economics. 2009;(22):131–144. DOI: 10.1007/s00148-007-0182-3
20. Machado J. Dealing with undocumented immigrants: the welfare effects of amnesties and deportations. Journal of Demographic Economics. 2017;83(4):445–492. DOI: 10.1017/dem.2017.14
21. Camarota S. A. The High Costof Cheap Labor Illegal Immigration and the Federal Budget. Paper no. 1- 881290-43-3. Washington, DC: Center for Immigration Studies; 2004.
22. Orszag P. R. The Impact of Unauthorized Immigrants on the Budgets of State and Local Governments. Congress of the united states. Congressional budget office paper. A Series on Immigration; 2007.
23. O’Brien M. The Fiscal Burden of Illegal Immigration On United States Taxpayers. Federation for American Immigration Reform (FAIR) Horizon Press; 2017.
24. Obiokoye N. Taxation of Undocumented Immigrants: The Uneasy Connection Between Regulating the Undocumented Immigrant and Fostering Illegal Activity. 2 Bus. Entrepreneurship & Tax L. Rev. 359, University of Missouri School of Law Scholarship Repository; 2018.
25. Locke J. Some Considerations of the Consequences of the Lowering of Interest and the Raising the Value of Money (1691). London; 1812. Available at: http://la.utexas.edu/users/hcleaver/368/368LockeSomeConsiderationsAlltable.pdf [Accessed: 10.11.2019].
26. Kakaulina M. O. Methodology for quantitative assessment of international “migration” of indirect taxes in Russian Federation based on structure of consumption of household sector. Izvestija Dalnevostochnogo federalnogo universiteta. Ekonomika i upravlenie = Bulletin of Far Eastern Federal University. Economy and Management, 2018;(2):77–86. (In Russ.) DOI: 10.24866/2311-2271/2018-2/77-86




DOI: https://doi.org/10.15826/jtr.2019.5.3.067

Copyright (c) 2019 Maria O. Kakaulina

eLibrary logoeLibrary logo  DOAJ logo ERIH PLUS logo 

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