Arbeitspapier
Myth and reality of flat tax reform: micro estimates of tax evasion response and welfare effects in Russia
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.
- Language
-
Englisch
- Bibliographic citation
-
Series: IZA Discussion Papers ; No. 3267
- Classification
-
Wirtschaft
Bureaucracy; Administrative Processes in Public Organizations; Corruption
- Subject
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Tax evasion
consumption-income gap
personal income tax
flat tax
difference-indifference
regression discontinuity
deadweight loss
transition
Russia
Einkommensteuer
Kopfsteuer
Steuerreform
Konsum
Einkommen
Steuerflucht
Russland
- Event
-
Geistige Schöpfung
- (who)
-
Gorodnichenko, Yuriy
Martinez-Vazquez, Jorge
Sabirianova Peter, Klara
- Event
-
Veröffentlichung
- (who)
-
Institute for the Study of Labor (IZA)
- (where)
-
Bonn
- (when)
-
2007
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Gorodnichenko, Yuriy
- Martinez-Vazquez, Jorge
- Sabirianova Peter, Klara
- Institute for the Study of Labor (IZA)
Time of origin
- 2007
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Myth and reality of flat tax reform: micro estimates of tax evasion response and welfare effects in Russia
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Tax shocks, sunspots and tax evasion
Tax overpayments, tax evasion, and book-tax differences
Productivity and Tax Evasion
Tax evasion and trust
Tax Evasion and Inequality
Tax evasion and competition