The Russian 'flat tax' reform

Abstract

"In 2001, Russia dramatically reduced its higher rates of personal income tax (PIT), establishing a single marginal rate at the low level of 13%. In the following year, real revenue from the PIT increased by about 26%. This 'flat tax' experience has attracted much attention (and emulation), making it perhaps the most important tax reform of recent years. But it has been little studied. This paper asks whether the strong performance of PIT revenue 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, does appear to have improved quite substantially - by about one third, according to our estimates - though it remains unclear whether this was due to the parametric tax reform or to accompanying changes in enforcement." Copyright � CEPR, CES, MSH, 2005.

Tax compliance under tax regime changes

“…This finding is in line with the results from recent empirical assessments of the Russian flat tax reform by Ivanova, Keen and Klemm (2005) as well as Gorodnichenko, Martinez-Vasquez and Peter (2009). What our experiment proves is that the effect is robust even when controlling for other determinants of compliance such as risk aversion, gender, or the marginal tax rate.…”

“…Proponents claim that their simplicity and incentives raise compliance (for surveys of the tax compliance literature, see Andreoni, Erard and Feinstein, 1998;Torgler, 2002;. Indeed, on the basis of household panel data, Ivanova, Keen and Klemm (2005) find that the Russian flat tax reform from 2001 has been associated with a higher degree of compliance. A similar result regarding the Russian reform is reported by Gorodnichenko, Martinez-Vasquez and Peter (2009)…”

Effect of Corruption on Tax Revenues in the Middle East

“…Corrupt employees also exert pressure when 6 Even theory does not provide a clear-cut answer on the relationship between tax rates and the degree of compliance. In the event of being caught, if the fine depends on the amount of income concealed or the amount of tax concealed, the reduction in tax rates may lead to an increase or decrease in the degree of compliance (see Ivanova et al, 2005 for a literature review).…”

Flat-rate tax systems and their effect on labor markets

“…In the Russian case, the reform was followed by significant real growth in personal income tax revenue [7]. However, there was no strong evidence that this was indeed caused by the reform itself or whether it was due to improved Furthermore, the situation in Russia was different from that in Western countries, insofar as the latter have a long tradition of taxation and a rather large tax administration to ensure tax compliance.…”