Who Bears the Burden of Taxes on Labor Income in Russia?

Martínez-Vázquez, Jorge; Rider, Mark; Wallace, Sally; Qibthiyyah, Riatu Mariatul

doi:10.2139/ssrn.989657

Cited by 5 publications

(3 citation statements)

References 14 publications

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“…A large increase in household income for the treatment group is consistent withMartinez-Vazquez et al (2006) finding a significant growth of individual earnings among high earners after the 2001 tax reform.…”

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confidence: 83%

Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia

2008

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in RussiaYuriy Gorodnichenko Jorge Martinez-Vazquez Klara Sabirianova Peter The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Utilizing difference-in-difference and regression-discontinuity-type approaches, we find that large and significant changes in tax evasion following the flat tax reform are associated with changes in voluntary compliance and cannot be explained by changes in tax enforcement policies. We also find the productivity response of taxpayers to the flat tax reform is small relative to the tax evasion response. Finally, we develop a feasible framework to assess the deadweight loss from personal income tax in the presence of tax evasion based on the consumption response to tax changes. We show that because of the strong tax evasion response the efficiency gain from the Russian flat tax reform is at least 30% smaller than the gain implied by conventional approaches.JEL Classification: D73, H24, H36, J3, O1, P2

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Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia

2008

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“…A more definite conclusion is reached by Gorodnichenko, Martinez-Vazquez, and Sabirianova Peter (hereafter GMP 2009) who show that a significant proportion of the increased compliance is due to the lower PIT rate. 5 Besides PIT revenue collections and compliance, the Russian reform has been used to estimate the effect of tax changes on gross declared income (IKK find a negative effect) and net of tax reported earnings (Martinez-Vazquez et al (2006) find a positive effect).…”

Section: Introductionmentioning

confidence: 99%

Does Labor Supply Respond to a Flat Tax? Evidence from the Russian Tax Reform

Peter

2009

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. We exploit the exogenous change in marginal tax rates created by the Russian flat tax reform of 2001 to identify the effect of taxes on labor supply of males and females. We apply the weighted difference-in-difference regression approach and instrumental variables to the labor supply function estimated on individual panel data. The mean regression results indicate that the tax reform led to a statistically significant increase in male hours of work but had no effect on that of females. However, we find a positive response to tax changes at both tails of the female hour distribution. We also find that the reform increased the probability of finding a job among both males and females. Despite significant variation in individual responses, the aggregate labor supply elasticities are trivial and suggest that reform-induced changes in labor supply were an unlikely explanation for the amplified personal income tax revenues that followed the reform.JEL Classification: H3, J2, J3, P2

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“…A more definite conclusion is reached by GMP (2009) who show that a significant proportion of the increased compliance is because of the lower PIT rate 6 . Besides PIT revenue collections and compliance, the Russian reform has been used to estimate the effect of tax changes on gross declared income (IKK find a negative effect) and net of tax reported earnings (Martinez‐Vazquez et al. , 2006, find a positive effect).…”

Section: Introductionmentioning

confidence: 99%

Does labour supply respond to a flat tax?

Duncan¹,

Peter²

2010

Economics of Transition

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We exploit the exogenous change in marginal tax rates created by the Russian flat tax reform of 2001 to identify the effect of taxes on the labour supply of men and women. We apply a weighted difference-in-difference regression approach and instrumental variables to estimate labour supply functions using a panel dataset. The mean regression results indicate that the tax reform led to a statistically significant increase in hours of work for men but had no effect on work hours for women. However, we find a positive response to tax changes in both tails of the female work hour distribution. We also find that the reform increased the probability of finding a job among both men and women. Despite significant variation in individual responses, the aggregate labour supply elasticities are trivial. This suggests that reform-induced changes in labour supply are an unlikely explanation for the amplified personal income tax revenues that followed the reform. Copyright (c) 2010 The Authors. Journal compilation (c) 2010 The European Bank for Reconstruction and Development.

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Who Bears the Burden of Taxes on Labor Income in Russia?

Cited by 5 publications

References 14 publications

Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia

Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia

Does Labor Supply Respond to a Flat Tax? Evidence from the Russian Tax Reform

Does labour supply respond to a flat tax?

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