IDEAS home Printed from https://ideas.repec.org/a/aiy/jnljtr/v6y2020i3p210-224.html
   My bibliography  Save this article

Fiscal Effects of Labour Income Tax Changes in Russia

Author

Listed:
  • Sergei G. Belev
  • Nikita S. Moguchev
  • Konstantin V. Vekerle

Abstract

The purpose of this article is to evaluate the fiscal effects of changes in social contribution rates in Russia for the period 2010–2014, which was marked by significant changes in tax legislation. The consequences of these changes for both the budget system and the labor market still have not been thoroughly studied. As the empirical and theoretical research shows, taxation could influence the labor market in two ways: through the intensive and extensive margin. This study tests the hypothesis about the two kinds of effects of taxation for Russia by using the data of the Russian Longitudinal Monitoring Survey. It is demonstrated that an increase in the social contribution rate causes a decline in labor participation both for women and men. Moreover, an increase in the social contribution rate causes a reduction in the net-of-tax wage level for women and men. The state has already exhausted the opportunities for raising social contributions and pushing the reforms further would mean jeopardizing budget revenues and fiscal sustainability. Generally, an increase in social contributions has had a negative impact on the government’s revenues from social contributions and the personal income tax. It can be concluded that in general, the fiscal effects of the reforms were negative rather than positive. We would recommend the government to reconsider the current social contribution rates. Since the labour market is highly sensitive, it is possible to raise tax revenue through other means, thus avoiding adverse effects on public welfare.

Suggested Citation

  • Sergei G. Belev & Nikita S. Moguchev & Konstantin V. Vekerle, 2020. "Fiscal Effects of Labour Income Tax Changes in Russia," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 6(3), pages 210-224.
    • Handle: RePEc:aiy:jnljtr:v:6:y:2020:i:3:p:210-224
    DOI: http://dx.doi.org/10.15826/jtr.2020.6.3.082
    as

    Download full text from publisher

    File URL: https://jtr.urfu.ru/fileadmin/user_upload/site_15907/2020/Belev-Moguchev-Vekerle.pdf
    Download Restriction: no
    File URL: https://libkey.io/http://dx.doi.org/10.15826/jtr.2020.6.3.082?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Gruber, Jonathan, 1997. "The Incidence of Payroll Taxation: Evidence from Chile," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 72-101, July.
    2. Burtless, Gary & Hausman, Jerry A, 1978. "The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiments," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1103-1130, December.
    3. Anderson, Patricia M. & Meyer, Bruce D., 2000. "The effects of the unemployment insurance payroll tax on wages, employment, claims and denials," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 81-106, October.
    4. Abby Alpert & David Powell, 2014. "Estimating Intensive and Extensive Tax Responsiveness Do Older Workers Respond to Income Taxes?," Working Papers WR-987-1, RAND Corporation.
    5. Bennmarker, Helge & Mellander, Erik & Öckert, Björn, 2009. "Do regional payroll tax reductions boost employment?," Labour Economics, Elsevier, vol. 16(5), pages 480-489, October.
    6. Alpert, Abby & Powell, David, 2014. "Estimating Intensive and Extensive Tax Responsiveness: Do Older Workers Respond to Income Taxes?," Working Papers 987-1, RAND Corporation.
    7. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Neumann, M., 2017. "Earnings responses to social security contributions," Labour Economics, Elsevier, vol. 49(C), pages 55-73.
    2. Kim, Jinyoung & Kim, Seonghoon & Koh, Kanghyock, 2022. "Labor market institutions and the incidence of payroll taxation," Journal of Public Economics, Elsevier, vol. 209(C).
    3. Matthias Collischon & Kamila Cygan-Rehm & Regina T. Riphahn, 2021. "Employment effects of payroll tax subsidies," Small Business Economics, Springer, vol. 57(3), pages 1201-1219, October.
    4. Emmanuel Saez & Benjamin Schoefer & David Seim, 2019. "Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden," American Economic Review, American Economic Association, vol. 109(5), pages 1717-1763, May.
    5. Hildegunn E. Stokke, 2021. "Regional payroll tax cuts and individual wages: heterogeneous effects of worker ability and firm productivity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(6), pages 1360-1384, December.
    6. Hildegunn Ekroll Stokke, 2015. "Regional payroll tax cuts and individual wages: Heterogeneous effects across education groups," Working Paper Series 16815, Department of Economics, Norwegian University of Science and Technology.
    7. Ku, Hyejin & Schönberg, Uta & Schreiner, Ragnhild C., 2020. "Do place-based tax incentives create jobs?," Journal of Public Economics, Elsevier, vol. 191(C).
    8. Lundberg, Jacob & Norell, John, 2018. "Taxes, benefits and labour force participation: A survey of the quasi-experimental literature," Ratio Working Papers 313, The Ratio Institute.
    9. Hyejin Ku & Uta Schönberg & Ragnhild C. Schreiner, 2018. "How Do Firms Respond to Place-Based Tax Incentives?," RF Berlin - CReAM Discussion Paper Series 1811, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    10. Andrew C. Johnston, 2021. "Unemployment Insurance Taxes and Labor Demand: Quasi-Experimental Evidence from Administrative Data," American Economic Journal: Economic Policy, American Economic Association, vol. 13(1), pages 266-293, February.
    11. Egebark, Johan & Kaunitz, Niklas, 2013. "Do payroll tax cuts raise youth employment?," Working Paper Series 2013:27, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    12. Egebark, Johan & Kaunitz, Niklas, 2018. "Payroll taxes and youth labor demand," Labour Economics, Elsevier, vol. 55(C), pages 163-177.
    13. Clément Carbonnier, 2014. "Payroll Taxation and the structure of qualifications and wages in a segmented frictional labor market with intrafirm bargaining," THEMA Working Papers 2014-20, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    14. Evelina Gavrilova & Floris Zoutman & Arnt Ove Hopland, 2017. "How to Use One Instrument to Identify Two Elasticities," CESifo Working Paper Series 6379, CESifo.
    15. Damon Jones & Alexander M. Gelber & Daniel W. Sacks & Jae Song, 2017. "Using Kinked Budget Sets to Estimate Extensive Margin Responses: Method and Evidence from the Social Security Earnings Test," Working Papers 2017-034, Human Capital and Economic Opportunity Working Group.
    16. Jonathan Deslauriers & Benoit Dostie & Robert Gagné & Jonathan Paré, 2021. "Estimating the impacts of payroll taxes: Evidence from Canadian employer–employee tax data," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(4), pages 1609-1637, November.
    17. Clément Carbonnier, 2015. "Payroll Taxation, qualifications, wages and unemployment rates in a frictional labor market with productive interactions between segments," Working Papers hal-01203122, HAL.
    18. Bedi, Arjun S. & Shiferaw, Admasu & Söderbom, Måns & Alemu Zewdu, Getnet, 2022. "Social insurance reform and workers’ compensation," Labour Economics, Elsevier, vol. 78(C).
    19. Egebark, Johan, 2016. "Effects of taxes on youth self-employment and income," Working Paper Series 2016:4, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    20. Andrea Albanese & Bart Cockx & Muriel Dejemeppe, 2022. "Long-Term Effects of Hiring Subsidies for Unemployed Youths—Beware of Spillovers," CESifo Working Paper Series 9972, CESifo.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aiy:jnljtr:v:6:y:2020:i:3:p:210-224. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Natalia Starodubets (email available below). General contact details of provider: https://edirc.repec.org/data/seurfru.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.