The Russian Flat Tax Reform

By Michael Keen, Alexander D Klemm, Anna Ivanova

January 1, 2005

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Michael Keen, Alexander D Klemm, and Anna Ivanova. The Russian Flat Tax Reform, (USA: International Monetary Fund, 2005) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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

Subject: Labor, Personal income, Personal income tax, Tax allowances, Wages

Keywords: Gross income, Tax rate, Wage rate, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/016
Stock No:

WPIEA2005016
ISBN:

9781451860351
ISSN:

1018-5941

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