Generate QR code
Open Access
Subscription Access
Lower VAT rate in Russia: Abrogate or apply
https://doi.org/10.32609/0042-8736-2024-8-50-67
Abstract
The article is devoted to a multilateral analysis of the VAT in Russia in the context of the problem of inequality based on RLMS and Rosstat data. The obtained estimates of elasticities of the VAT burden on the income, as well as the Kakwani and Musgrave indexes, show that the nature of VAT in Russia is generally more favorable than in OECD countries. In relation to income VAT is slightly regressive, but in relation to expenditures VAT cannot be recognized as regressive. The counterfactual analysis has shown that the lower 10% rate is a socially important element of the VAT and plays a noticeable leveling role. For the first time, microdata for Russia are used to assess the consequences of replacing the lower VAT rate with a direct targeted subsidy in the form of an additional child allowance. The results show that such a reform doesn’t solve the problem of inequality, since the poorest households get their little benefit not from the wealthiest, but rather from poor households of the 2nd—4th deciles.
About the Authors
E. A. Leonov
https://www.iep.ru/ru/person/leonov-elisey-aleksandrovich.html
Gaidar Institute for Economic Policy; Russian Presidential Academy of National Economy and Public Administration
Russian Federation
Gaidar Institute for Economic Policy; Russian Presidential Academy of National Economy and Public Administration
Russian Federation
Elisey A. Leonov.
Moscow
S. G. Belev
https://www.ranepa.ru/ob-akademii/prepodavateli-i-sotrudniki/sotrudnik/?id=82303a8f-f827-e611-80cb-005056a06105
Russian Presidential Academy of National Economy and Public Administration; Lomonosov Moscow State University
Russian Federation
Russian Presidential Academy of National Economy and Public Administration; Lomonosov Moscow State University
Russian Federation
Sergey G. Belev.
Moscow
References
1. Belev S. G., Vekerle K. V. (2018). Russian Federation tax expenditure efficiency analysis (Based on property tax deduction and preferential VAT rate). Ars Administrandi, Vol. 10, No. 4, pp. 610—630. (In Russian). https://doi.org/10.17072/2218-9173-2018-4-610-630
2. Kapeliushnikov R. I. (2019). Is economic inequality a universal evil? Voprosy Ekonomiki, No. 4, pp. 91—106. (In Russian). https://doi.org/10.32609/0042-8736-2019-4-91-106
3. Lykova L. N. (2013). Тhe possibility of return to the progressive income taxation of individuals in Russia. Vestnik Instituta Еkonomiki RAN, No. 6, pp. 32—51. (In Russian).
4. Ordynskaya E. V., Cherkovets M. V. (2021). Оn the fiscal burden of various income groups of the population. Problemy Prognozirovaniya, No. 6, pp. 20—30. (In Russian). https://doi.org/10.47711/0868-6351-189-20-30
5. Sokolov I., Malinina T. (2017). Tax benefits: Нow to measure their efficiency? Ekonomicheskoe Razvitie Rossii, No. 10, pp. 53—59. (In Russian).
6. Alavuotunki K., Haapanen M., Pirttilä J. (2019). The effects of the value-added tax on revenue and inequality. Journal of Development Studies, Vol. 55, No. 4, pp. 490—508. https://doi.org/10.1080/00220388.2017.1400015
7. Atkinson A. B., Stiglitz J. E. (1976). The design of tax structure: Direct versus indirect taxation. Journal of Public Economics, No. 6, pp. 55—75. https://doi.org/10.1016/0047-2727(76)90041-4
8. Blasco J., Guillaud E., Zemmour M. (2023). The inequality impact of consumption taxes: An international comparison. Journal of Public Economics, Vol. 222, article 104897. https://doi.org/10.1016/j.jpubeco.2023.104897
9. Boadway R., Cuff K. (2022). A generalization of the Deaton—Hellwig results on uniform commodity taxation. Journal of Public Economics, Vol. 214, article 104731. https://doi.org/10.1016/j.jpubeco.2022.104731
10. Boadway R., Song Z. (2016). Indirect taxes for redistribution: Should necessity goods be favored? Research in Economics, Vol. 70, No. 1, pp. 64—88. https://doi.org/10.1016/j.rie.2015.06.002
11. Borowiecki K. J., Navarrete T. (2018). Fiscal and economic aspects of book consumption in the European Union. Journal of Cultural Economics, No. 42, рр. 309—339. https://doi.org/10.1007/s10824-017-9307-z
12. Caspersen E., Metcalf G. E. (1994). Is a value added tax regressive? Annual versus lifetime incidence measures. National Tax Journal, Vol. 47, pp. 731—746. https://doi.org/10.1086/NTJ41789105
13. Davis E. H., Kay J. A. (1985). Extending the VAT base: Problems and possibilities. Fiscal Studies, Vol. 6, No. 1, pp. 1-16. https://doi.org/10.1111/j.1475-5890.1985.tb00396.x
14. Deaton A. (1979). Optimally uniform commodity taxes. Economics Letters, Vol. 2, No. 4, pp. 357—361. https://doi.org/10.1016/0165-1765(79)90050-8
15. Decoster A., Loughrey J., O’Donoghue C., Verwerft D. (2010). How regressive are indirect taxes? A microsimulation analysis for five European countries. Journal of Policy Analysis and Management, Vol. 29, No. 2, рр. 326—350. https://doi.org/10.1002/pam.20494
16. Fleurbaey M. (2006). Is commodity taxation unfair? Journal of Public Economics, Vol. 90, No. 10-11, pp. 1765—1787. https://doi.org/10.1016/j.jpubeco.2006.06.001
17. Gaarder I. (2019). Incidence and distributional effects of value added taxes. Economic Journal, Vol. 129, No. 618, pp. 853—876. https://doi.org/10.1111/ecoj.12576
18. Kakwani N. C. (1977). Measurement of tax progressivity: An international comparison. Economic Journal, Vol. 87, No. 345, pp. 71—80. https://doi.org/10.2307/2231833
19. Kaplow L. (2006). On the undesirability of commodity taxation even when income taxation is not optimal. Journal of Public Economics, Vol. 90, No. 6—7, pp. 1235—1250. https://doi.org/10.1016/j.jpubeco.2005.07.001
20. Liberati P. (2001). The distributional effects of indirect tax changes in Italy. International Tax and Public Finance, Vol. 8, pp. 27—51. https://doi.org/10.1023/A:1008789432330
21. Mankiw N. G., Weinzierl M., Yagan D. (2009). Optimal taxation in theory and practice. Journal of Economic Perspectives, Vol. 23, No. 4, pp. 147—174. https://doi.org/10.1257/jep.23.4.147
22. Musgrave R. A., Musgrave P. B. (1989). Public finance in theory and practice. 5th ed. New York: McGraw-Hill Book Co
23. van Oordt M. (2018). Zero rating versus cash transfers under the VAT. Fiscal Studies, Vol. 39, No. 3, pр. 489—515. https://doi.org/10.1111/1475-5890.12168
24. Politi R. B., Mattos E. (2011). Ad-valorem tax incidence and after-tax price adjustments: Evidence from Brazilian basic basket food. Canadian Journal of Economics, Vol. 44, No. 4, pp. 1438—1470. https://doi.org/10.1111/j.1540-5982.2011.01680.x
25. Suits D. B. (1977). Measurement of tax progressivity. American Economic Review, Vol. 67, No. 4, pp. 747—752.
26. Thomas A. (2021). Reassessing the regressivity of the VAT. Fiscal Studies, Vol. 43, No. 1, pр. 23—38. https://doi.org/10.1111/1475-5890.12290
27. Tyson J. (2014). Reforming tax expenditures in Italy: What, why, and how? IMF Working Paper, No. WP/14/7. https://doi.org/10.5089/9781484370773.001
28. Villela L., Lemgruber A., Jorratt M. (2010) Tax expenditure budgets concepts and challenges for implementation. IDB Working Paper Series, No. IDBWP-131en. Inter-American Development Bank.
29. Warwick R., Harris T., Phillips D., Goldman M., Jellema J., Inchauste G., Goraus-Tańska K. (2022). The redistributive power of cash transfers vs VAT exemptions: A multi-country study. World Development, Vol. 151, article 105742. https://doi.org/10.1016/j.worlddev.2021.105742
30. Xisco O., Encabo I., Padilha G., Piccoli L. (2022). Reducing the regressivity of indirect taxation in Brazil through a personalized value-added tax. Journal of Policy Modeling, Vol. 44, No. 5, pp. 903—919. https://doi.org/10.1016/j.jpolmod.2022.09.002
31. Zandvakili S. (1992). The distributional implications of the tax changes in the 1980s. Jerome Levy Economics Institute Working Paper, No. 70. https://doi.org/10.2139/ssrn.161588
32. Zu Y. (2017). Reforming VAT сoncessions: A tax expenditure analysis. British Tax Review, No. 4, pp. 418—437.
Supplementary files
Review
For citations:
Leonov E.A., Belev S.G. Lower VAT rate in Russia: Abrogate or apply. Voprosy Ekonomiki. 2024;(8):50-67. (In Russ.) https://doi.org/10.32609/0042-8736-2024-8-50-67
Views:
559
Email this article 
