IDEAS home Printed from https://ideas.repec.org/a/aiy/jnljtr/v7y2021i1p20-38.html
   My bibliography  Save this article

Introduction of the personal tax-free allowance in Russia and its budget implications

Author

Listed:
  • Vladimir V. Gromov

Abstract

The social problem of poverty can be mitigated by introduction of a personal tax-free allowance. In this paper the likely effects that a personal tax-free allowance will have on the Russian budget is investigated. It has been assumed that a tax-free allowance will hit regional budgets because they depend greatly on income tax revenue. The indicated effects were estimated by applying a personal tax-free allowance to the data on economic conditions in 2019. Rosstat data on population, poverty, wages and gross regional product and Federal Tax Service data on the number of taxpayers and personal income tax revenues were used. For the purpose of the paper, two scenarios were calculated. In the first scenario, a zero personal income tax rate is applied to wages below the minimum cost of living. We found that under this scenario the consolidated budget of Russia loses over 1 trillion rubles while regional tax revenues reduce by more than 10%. In the second scenario, citizens whose income is below the minimum cost of living are exempt from personal income tax. We found that under this scenario regional tax revenues would be reduced by 1-5%. In both cases the introduction of the personal tax-free allowance puts greater pressure on regions that critically depend on the personal income tax receipts. It was concluded that the negative effect of an introduction of a personal tax-free allowance would be greater, the greater the prevalence of low-income taxpayers in a region. Also considerable regional disparities create a risk that such tax reform will deepen regional inequality and be disruptive for the Russian budgetary system.

Suggested Citation

  • Vladimir V. Gromov, 2021. "Introduction of the personal tax-free allowance in Russia and its budget implications," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 7(1), pages 20-38.
    • Handle: RePEc:aiy:jnljtr:v:7:y:2021:i:1:p:20-38
    DOI: http://dx.doi.org/10.15826/jtr.2021.7.1.088
    as

    Download full text from publisher

    File URL: https://jtr.urfu.ru/fileadmin/user_upload/site_15907/2021/Gromov_new.pdf
    Download Restriction: no
    File URL: https://libkey.io/http://dx.doi.org/10.15826/jtr.2021.7.1.088?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. Tanzi, Vito & Zee, Howell H., 2000. "Tax Policy for Emerging Markets: Developing Countries," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(2), pages 299-322, June.
    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. Leanora Alecia Brown & Jorge Martinez-Vazquez, 2015. "International Debt Forgiveness: Who Gets Picked and Its Effect On The Tax Effort Of Developing Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1504, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Takumi Naito, 2013. "Aid for trade, infrastructure, and growth," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(6), pages 886-909, December.
    3. John E. Anderson, 2014. "Informal Payments to the Tax Collector in Transition Countries," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 3(2), pages 1-26, May.
    4. Thomas, P Mini, 2015. "Tax contribution of service sector: An empirical study of service taxation in India," Working Papers 344, Institute for Social and Economic Change, Bangalore.
    5. Ms. Janet Gale Stotsky & Ms. Asegedech WoldeMariam, 2002. "Central American Tax Reform: Trends and Possibilities," IMF Working Papers 2002/227, International Monetary Fund.
    6. repec:idq:ictduk:13683 is not listed on IDEAS
    7. Godin, M. & Hindriks, J., 2015. "A Review of Critical Issues on Tax Design and Tax Administration in a Global Economy and Developing Countries," LIDAM Discussion Papers CORE 2015028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Nancy Birdsall & Liliana Rojas-Suarez (ed.), 2004. "Financing Development: The Power of Regionalism," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 359, April.
    9. Ioannidis, Yiorgos, 2015. "The political economy of the distributional character of the Greek taxation system (1995–2008)," MPRA Paper 64033, University Library of Munich, Germany.
    10. Hermann D. Yohou & Michaël Goujon & Wautabouna Ouattara, 2016. "Heterogeneous Aid Effects on Tax Revenues: Accounting for Government Stability in WAEMU Countries," Journal of African Economies, Centre for the Study of African Economies, vol. 25(3), pages 468-498.
    11. Mini P. Thomas, 2017. "Empirics of service taxation in India: a macroeconomic perspective," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 19(1), pages 143-160, April.
    12. Milan Sedmihradsky & Stanislav Klazar, 2002. "Tax Competition for FDI in Central-European Countries," CESifo Working Paper Series 647, CESifo.
    13. Keita, Kady & Rabaud, Isabelle & Turcu, Camelia, 2023. "Fiscal outcomes, current account imbalances, and institutions in Europe: Exploring nonlinearities," International Economics, Elsevier, vol. 175(C), pages 121-134.
    14. Ali Merima & Shifa Abdulaziz B. & Shimeles Abebe & Woldeyes Firew, 2017. "Working Paper 290 - Building Fiscal Capacity The role of ICT," Working Paper Series 2404, African Development Bank.
    15. Merima Ali & Abdulaziz B. Shifa & Abebe Shimeles & Firew Woldeyes, 2021. "Building Fiscal Capacity in Developing Countries: Evidence on the Role of Information Technology," National Tax Journal, University of Chicago Press, vol. 74(3), pages 591-620.
    16. Kasuga, Hidefumi & Morita, Yuichi, 2012. "Aid effectiveness, governance and public investment," Economic Modelling, Elsevier, vol. 29(2), pages 514-521.
    17. Céline DE QUATREBARBES & Luc SAVARD & Dorothée BOCCANFUSO, 2011. "Can the removal of VAT Exemptions support the Poor? The Case of Niger," Working Papers 201106, CERDI.
    18. Anastasiou Athanasios & Kalligosfyris Charalampos & Kalamara Eleni, 2021. "Determinants of tax evasion in Greece: Econometric analysis of co-integration and causality, variance decomposition and impulse response analysis," Bulletin of Applied Economics, Risk Market Journals, vol. 8(1), pages 29-57.
    19. Kodjo Adandohoin, 2021. "Tax transition in developing countries: do value added tax and excises really work?," International Economics and Economic Policy, Springer, vol. 18(2), pages 379-424, May.
    20. Garcia Penalosa, Cecilia & Turnovsky, Stephen J., 2005. "Second-best optimal taxation of capital and labor in a developing economy," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1045-1074, June.
    21. Manamba Epaphra, & John Massawe,, 2017. "Corruption, governance and tax revenues in Africa," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(4), pages 439-467, October.

    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:7:y:2021:i:1:p:20-38. 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.