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Assessment of the Impact of Social Tax Deductions for Personal Income Tax on the Welfare and Inequality of Citizens in Russia

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  • Andrey A. Pugachev

Abstract

The increase in the demand for social tax deductions for personal income tax and the increase in their limits, along with the need to overcome poverty and inequality in Russia, are enshrined in the 2023 Presidential Address, which determines the relevance of research on the impact of social tax deductions on welfare and income inequality. The purpose of this study is to assess the impact of social tax deductions for personal income tax on the welfare and inequality of citizens in Russia. The hypothesis of the study is that the impact of social tax deductions for personal income tax on the welfare of citizens is insignificant; their impact potential is not realized. As part of the study, correlation and regression analysis was applied (the "Data Analysis" package in Excel): the influence of the share of social tax deductions in the amount of income from personal income tax (factor indicator) on indicators of well-being and inequality (resulting indicators) was estimated. The study uses statistical data from the Federal Tax Service, Rosstat and the database of the study of the transformation of inequality of citizens in Russia, conducted in 2022. As a result of the study, a close relationship was established between the share of social tax deductions in the total amount of personal income tax and indicators of inequality: the Gini coefficient and the quintile coefficient of funds, as well as the lack of connection with indicators of well-being. Social tax deductions smooth out the inequality of citizens to a certain extent, but they have no impact on the level of well-being. Strengthening the importance of social tax deductions for personal income tax is possible due to an increase in their limits. The directions of improving the provision of social tax deductions are differentiation of categories of recipients, indexation of deduction limits and simplification of the procedure for obtaining them. The theoretical significance of the study is to develop an assessment of the impact of social tax deductions on the welfare and inequality of citizens, as well as to enhance it, in comparison with the traditional approach, by analyzing the results of a sociological survey on the demand for deductions by taxpayers. The practical significance of the study is determined by the possibility of taking into account proposals for improving social tax deductions to smooth out inequality.

Suggested Citation

  • Andrey A. Pugachev, 2023. "Assessment of the Impact of Social Tax Deductions for Personal Income Tax on the Welfare and Inequality of Citizens in Russia," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 22(4), pages 789-813.
    • Handle: RePEc:aiy:jnjaer:v:22:y:2023:i:4:p:789-813
    DOI: https://doi.org/10.15826/vestnik.2023.22.4.032
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    More about this item

    Keywords

    inequality of citizens; welfare of citizens; personal income tax; tax benefits; social tax deductions.;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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