Myth and reality of flat tax reform: micro estimates of tax evasion response and welfare effects in Russia
Yuriy Gorodnichenko; Jorge Martinez-Vazquez; Klara Sabirianova Peter
Using micro-level data, we examine the effects of Russia's 2001 flat rate income tax reform on consumption, income, and tax evasion. We use the gap between household expenditures and reported earnings as a proxy for tax evasion with data from a household panel for 1998-2004. 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. -- Tax evasion ; consumption-income gap ; personal income tax ; flat tax ; difference-indifference ; regression discontinuity ; deadweight loss ; transition ; Russia
Year of publication: |
Dec. 2007
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Other Persons: | Gorodnichenko, Yuriy (contributor) ; Martinez-Vazquez, Jorge (contributor) ; Sabirianova Peter, Klara (contributor) |
Publisher: |
Bonn : IZA |
Subject: | Einkommensteuer | Income tax | Pauschalbesteuerung | Lump-sum taxation | Steuerreform | Tax reform | Konsum | Consumption | Einkommen | Income | Steuerflucht | Cross-border tax evasion | Russland | Russia | 1998-2004 |
Saved in:
freely available
Extent: | Online-Ressource, 55 S., Text graph. Darst. |
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Series: | Discussion paper series / IZA. - Bonn : IZA, ZDB-ID 2120053-1. - Vol. 3267 |
Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature |
Language: | English |
Notes: | Systemvoraussetzungen: Acrobat reader |
Other identifiers: | hdl:10419/34974 [Handle] |
Classification: | D73 - Bureaucracy; Administrative Processes in Public Organizations; Corruption |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10003652671