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

Lyudmila N. Lykova

Journal of Tax Reform, 2018, vol. 4, issue 2, 174-187

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

Keywords: Personal income tax; progressive tax scale; flat rate; lognormal distribution of taxpayers; tax burden; tax deduction (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnljtr:v:4:y:2018:i:2:p:174-187

DOI: 10.15826/jtr.2018.4.2.051

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