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The Russian Flat Tax Reform

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Author Info

  • Michael Keen
  • Alexander Klemm
  • Anna Ivanova

Abstract

Russia dramatically reduced its higher rates of personal income tax (PIT) in 2001 establishing a single marginal rate at the low level of 13 percent. In the following year, real revenue from the PIT actually increased by about 26 percent. This ''flat tax'' experience has attracted much attention (and emulation) among policymakers, making it perhaps the most important tax reform of recent years. But it has been little studied. This paper asks whether the strong revenue performance of the PIT was itself a consequence of this reform, using both macro evidence and, in particular, micro-level data on the experiences of individuals and households affected by the reform to varying degrees. It concludes that there is no evidence of a strong supply side effect of the reform. Compliance, however, did improve quite substantially-by about one third according to our estimates-though it remains unclear whether this was due to the parametric reforms or to accompanying changes in enforcement.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/16.

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Length: 47
Date of creation: 01 Jan 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/16

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Keywords: Tax reforms; Income taxes; tax reform; tax payments; tax rates; tax evasion; social taxes; flat tax; tax base; marginal tax rate; taxation; tax revenue; personal income tax; budget constraint; marginal tax rates; tax authority; tax revenues; tax income; tax administration; taxable income; tax liability; tax incomes; tax authorities; higher tax rates; tax compliance; amount of tax; tax cut; rate of tax; payroll taxes; flat tax reform; formal sector; tax receipts; tax structures; income shifting; tax rate structure; fiscal affairs; fiscal revenue; tax bases; fiscal studies; tax rate reduction; tax reduction; flat taxes; tax avoidance; reduction in tax; budgetary funds; tax changes; public finance; tax system; substitution effect; personal income taxes; fiscal policies; tax arrears; average rate of tax; tax on dividends; federal tax; international tax; corporate income tax; fiscal affairs department; tax purposes; fiscal affairs departments; taxpayer compliance; tax service; tax deductions; high tax rates; marginal rate of tax; tax cuts; tax wedge; taxpayer identification; trade taxes; tax audits; tax obligations; state tax; corporate tax rate; regional tax; tax police; lower tax rates; income effect; tax distortions; property taxes; tax allowances;

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  1. Eduardo Engel & James Hines, 2000. "Understanding Tax Evasion Dynamics," Econometric Society World Congress 2000 Contributed Papers 1117, Econometric Society.
  2. Roger H. Gordon & Joel Slemrod, 1998. "Are "Real" Responses to Taxes Simply Income Shifting Between Corporate and Personal Tax Bases?," NBER Working Papers 6576, National Bureau of Economic Research, Inc.
  3. Richard Blundell & Alan Duncan & Costas Meghir, 1995. "Estimating labour supply responses using tax reforms," IFS Working Papers W95/07, Institute for Fiscal Studies.
  4. Edgar L. Feige & Ivica Urban, 2003. "Estimating the Size and Growth of Unrecorded Economic Activity in Transition Countries: A Re-evaluation of Electric Consumption Method Estimates and their Implications," Macroeconomics 0311010, EconWPA.
  5. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
  6. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
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