About taxes with love

Print Sergey Sinelnikov-Murylev

On the origins of the modern Russian tax system

In the USSR, payments to the budget were not essentially a tax system. The only payment that more or less resembled a tax was income tax. But in general, it was also possible not to charge it. After all, we were all government employees, and it was possible to simply underpay the corresponding amount of wages.

All other mandatory payments did not have the characteristic properties of taxes. Taxation of enterprises was carried out, as a rule, with the help of two instruments - turnover tax and transfer of free surplus profit to the budget. The turnover tax was essentially not a tax, but rather a kind of mechanism for regulating prices and represented a certain part of the price, individually set for each product. Accordingly, there was no single rate, but a huge number of these allowances. As for the second instrument - transferring the free balance of profit, it operated as follows: at the end of the year, everything that was left was taken from the enterprise after paying all the expenses necessary from the state’s point of view and transferring turnover tax and a number of other payments.

These were the main features of the Soviet “pseudo-tax” system [1] . When reforms began in the country, the question arose of which taxation system to move to.

In the fall of 1991, a package of laws was adopted that defined the main features of the new tax system of Russia - the Law on the Fundamentals of the Tax System and others. This was preceded by great discussions. For example, the following arguments were given: “VAT is a complex tax, Russia will not be able to switch to it earlier than in five years.” I categorically disagreed with this. We are not Africa or even South America. Perhaps we can still be compared in terms of GDP per capita, but, for example, in terms of such an indicator as the proportion of the literate population, Russia is far superior to most developing countries. And if our accountants cope with such a complex tax as income tax, what will prevent them from coping with VAT, which is noticeably simpler, especially if it is paid on invoices?

There were many controversial issues, but we agreed on one thing: in the Soviet Union there was a completely incomprehensible system of withdrawal of income, and it is necessary to move from it to the normal tax system that exists in developed countries with market economies.

Of course, this approach involved significant use of foreign experience, but why invent something new when there are properly functioning tax systems? The experience of a number of countries was used, but to a greater extent European than the United States.

In other words, we actively borrowed from many existing tax systems that have shown their effectiveness, but to say that the Russian system is “copied” from some foreign one would be an extreme exaggeration. A striking example is VAT. If they borrowed it exactly, it would immediately be normal, that is, approximately the same as it is now. And at first he was absolutely terrible. It was “gross VAT”, i.e. almost all capital expenditures were taxed. Over the past years, work has been going on to improve it, which, hopefully, is already close to completion. The income tax also previously had many very significant features, which led, for example, to the fact that unprofitable enterprises (if financial results are calculated according to generally accepted standards) in Russia had to pay income tax (!).

Three criteria for assessing the tax system

Speaking about the tax systems of developed countries, I described them above as “effective”. What does this mean?

From the point of view of modern taxation theory, the tax system must satisfy several criteria, the most important of which are neutrality, fairness and budgetary efficiency.

Neutrality means that the tax system, if possible, should not distort the decision-making of economic entities. Of course, any real tax system distorts these decisions to one degree or another, but this criterion can be formulated quite strictly.

Completely neutral taxes are used very rarely in practice. A striking example is M. Thatcher’s attempt to introduce the so-called poll tax (poll tax) in Great Britain, which has the property of neutrality. It was supposed to be collected from each subject in equal amounts. It does not distort economic decisions because a taxpayer cannot change the amount of tax he pays by changing his behavior.

Unlike the poll tax, the amount of income tax you pay can be changed by changing your behavior, especially when there are many exemptions and exceptions. The theory of optimal taxation strictly shows why taxes of this kind lead to losses in social welfare.

From the requirement of neutrality it follows that the number of tax benefits should be minimal. Those social, structural and other problems that we often try to solve through benefits must be solved with the help of other instruments - transfers, subsidies, loans and other direct financial assistance.

Nevertheless, the implementation in practice of minimally neutral poll taxes is hardly possible, nor is it necessary. The reason is that this tax does not satisfy the second criterion - the criterion of fairness.

Justice can be defined in different ways, and this definition will depend on the level of development of society and even on individual ethical preferences. But in general, this requirement means that tax payments must be proportionate to the ability of the taxpayer to pay taxes.

Budgetary efficiency means that the tax system should provide the state with the necessary financial resources and should not spend too much money on its functioning. This refers to costs of any kind: both direct, i.e., state costs for the activities of the relevant bodies, and indirect, i.e., taxpayer costs associated with compliance with tax legislation.

These are the three criteria for assessing the tax system. They should be used to compare the taxation systems of different countries.

Neutrality and fairness of the Russian tax system

What does the current Russian tax system look like from the point of view of the formulated criteria?

As for neutrality, Russian society in recent years has managed to significantly improve the tax system according to this criterion. The most striking example is the income tax, in respect of which all benefits were abolished. Of course, there are still some technical problems - with the calculation of depreciation, some subtleties in determining the base, but in general it has become quite neutral. Another example is income tax. Many categorical benefits were eliminated. There remain, however, the so-called social benefits - deductions from the taxable amount of educational and medical expenses. They are extremely regressive, that is, they are used to a greater extent by the rich than by the poor, but since their size is small, there is no big problem in this.

Currently, our institute (Institute for the Economy in Transition) has developed a bill proposing VAT changes in the same direction. Just as in the case of income tax, it is intended to eliminate all benefits. The rate has been left at two levels: zero percent for exports and 17-18 percent for everything else. If such legislation were passed, it could be a significant move toward greater neutrality.

As for justice, the situation here is somewhat more complicated. In order to characterize the situation in this area, I will give an example with the adoption of a unified (flat) income tax scale. On the one hand, a progressive income tax responds to an intuitive principle, or more accurately, a sense of fairness: the rich give away a larger share of their income than the poor. But this approach is not always effective from an economic point of view. The fact is that the rich have a higher share of savings in their income than the poor. This means that the larger part of the income remains with them, the larger the share of GDP is saved, the more resources will be directed to investments and, consequently, the higher economic growth (if, of course, these investments are made in our country). However, the vast majority of countries apply progressive income taxation, ignoring some of the costs.

It would seem that if the income tax scale is progressive, then the rich should pay a larger share of their income than the poor. But in Russia (as, indeed, in a number of other post-socialist and developing countries) everything is not so simple. As soon as some statistics were accumulated (i.e., around the mid-90s), it became clear that in fact our rich pay a clearly smaller share of income than the poor.

Why is this happening? Due to the huge scale of tax evasion. The rich have more opportunities to avoid paying taxes. Their income, as a rule, is not wages, but wages are heavily taxed, which is taken at the source of payment. In addition, rich people have more opportunities to legally transform their income into a form that is taxed either at a low rate or not at all. Thus, there are two ways to reduce taxes: either illegal evasion, or disguising income as low-tax or non-taxable income. For example, property used by the owner and manager of an enterprise may, upon purchase, be registered not in his name, but in the name of the enterprise; dividends may be presented as interest or insurance payments; wages may be paid in unaccounted cash, etc.

So, it turns out that a tax that is formally progressive turns out to be regressive. In this situation, it would be logical to assume that a sharp reduction in marginal (nominal) tax rates will lead to the fact that evasion among rich people will decrease and the effective (real) tax rate will become higher. In fact, this is what happened. Income tax revenues for the year increased by 15 percent as a share of GDP (24 percent in real terms). Once last year's income tax collection data was available, it became possible to test various hypotheses to explain revenue growth. In addition to reducing tax evasion, factors such as a decrease in debt to public sector employees, an increase in the salaries of military personnel, a shift in the accrual of income over time, etc. are mentioned. However, an analysis of statistics showed that these factors cannot fully explain the increase in revenues. But this growth can be fully explained if we proceed from the hypothesis of a decrease in tax evasion. We tested it by calculating a model built on the following assumption: an individual maximizes his expected income, taking into account, on the one hand, tax rates, and on the other, possible punishment if he evades taxes. Calculations have shown that the increase in revenues is fully explained by this behavior: regional data indicate that tax revenues increased more where the magnitude of the reduction in the average marginal tax rate was higher before the reform (i.e. where personal income was taxed at higher rates before the reform) .

Thus, from the point of view of fairness, the introduction of a flat income tax of 13 percent led to an improvement in the tax system according to this criterion. The rich now pay a relatively larger share of their income compared to the poor than they did before.

Unfortunately, at present there are no reliable statistics and, therefore, serious studies that would allow us to evaluate other Russian taxes according to the criterion of fairness. Although some preliminary judgments can still be made. For example, income tax until recently was likely to be regressive, in particular due to the so-called investment benefit. According to this rule, the portion of profits spent on investments was taxed at a rate two times lower than the rest of the profits, which was taxed at the general rate. This benefit could be used by more profitable, more profitable enterprises that were able to make investments without benefits. This benefit has now been eliminated, which appears to have increased the fairness of the tax.

Problems of tax administration in Russia

Tax legislation is developing gradually; it is impossible to change anything quickly in this area. But problems arise constantly, and often they have to be solved on the fly. For example, in parallel with accounting, tax accounting is being introduced in January of this year, for which there are no well-functioning computer programs yet. There are many such problems, but they are not the main ones.

The main problem of tax administration in Russia is the imbalance of the rights and responsibilities of the tax service and the taxpayer . On the one hand, the tax service has too many rights in some areas, on the other hand, the taxpayer often also has too many rights, but in other areas.

Achieving a rational balance in Russia is more difficult than in other developed countries. The main reason is that tax inspectors in Russia are very poor, but at the same time have serious power over the taxpayer. Hence the high level of corruption of tax authorities. In the absence of normal judicial protection, it becomes possible to selectively apply the law to put pressure on a specific taxpayer. There are a lot of possibilities for this. In addition, tax authorities are often biased towards political goals.

A typical example: representatives of the tax service come to an enterprise with an audit, based on the results of which they present the taxpayer with huge amounts of tax arrears, fines and penalties “calculated”, demanding to pay immediately. The company disagrees and is ready to present its arguments. And the tax authorities say: “We understand that you will most likely get everything back through the court, but first you must pay.” If an enterprise does not pay, its accounts, property and other sanctions may be seized, i.e. its managers are put in a desperate situation. True, not everything is so scary: the tax authorities should offer to come to an agreement. And they come to an agreement. With some people just for money, with others they agree on a smaller amount of arrears that the company is able to pay (in the case when the tax inspectorate needs to report to higher authorities). It turns out to be ordinary blackmail of the taxpayer. And it is possible because there is a legislative norm that allows (with the exception of some cases) the tax service to unilaterally, without a court decision, demand payment by the taxpayer of any accrued tax amounts.

An example of a bias in the other direction is the so-called transfer prices, i.e. low prices in transactions between interdependent taxpayers for the purpose of tax evasion. Now this is simply a scourge of the Russian economy.

It would seem that there is nothing wrong with lowering prices. Let's imagine a closed economy in which one enterprise sells its products to another. If it lowers the price, then its added value and profit will decrease, and the buyer’s will increase by the same amount. Everything seems to be fine. But in reality, everything happens quite differently, and tax evasion schemes through transfer prices have become the mainstay for large enterprises. In simplified form it looks like this. The purchasing enterprise creates a fly-by-night company that buys products from a real supplier at his prices and sells them at inflated prices so that the purchasing enterprise's profit is reduced and added value is minimal. When a short-lived intermediary enterprise accumulates a significant amount of profit, it ceases its operation, having first cashed out or transferred all the money to an offshore zone. The selling company does the same (but lowering prices) - it sells products to its customers through a short-lived enterprise. Similar schemes are implemented for false VAT refunds on exports, etc. At the same time, there are no constructive legislative norms that provide real tools to combat the use of transfer prices.

This situation must be changed. Massive tax evasion destroys the tax system and makes it unfair. However, if you give the tax service serious, but unbalanced rights to actually influence the setting of prices, what I have already described above will begin: tax officials will come to taxpayers and, under the threat of sanctions for the potential use of transfer prices, extort money, force them to finance someone’s election campaign. campaign, etc.

In a word, the situation is very complex and confusing. It is insoluble within the framework of tax administration itself, as it is complicated by the imperfection of criminal and civil legislation. To combat fly-by-night scams, it would be necessary to decisively increase the criminal liability of the founders of legal entities for what is now called “false entrepreneurship.” In addition, in my opinion, for some period of time it would be advisable to allow persons who do not have a tax history to establish companies only with full liability. In this case, it will be much more difficult to create one-day companies, since their founders will be forced to answer their tax obligations with their property (i.e., apartment, dacha, etc.).

When compared with Europe, the legal conditions for the creation and operation of small firms there are both more stringent and softer. On the one hand, liability for violations of the law is much more serious, given the existence of effective legislative norms. On the other hand, registration procedures are faster and less burdensome. (By the way, in this regard, the popular idea of ​​​​one-stop registration requires great caution: in order to complicate the creation of one-day shells, more thorough verification of the founders is necessary, and this cannot be done quickly.)

Examples of the imbalance of rights and obligations of tax authorities and taxpayers can be given endlessly. A striking example is the taxation of personal income and personal property. For example, numerous cottages in Moscow and the Moscow region are subject to property tax at their “official” value recorded in the BTI, but in most cases they are generally considered unfinished buildings and are not subject to any taxes. And the tax service cannot do anything about it. You can live in your own mansion, worth millions of dollars, and not pay either property tax or income tax, since such a citizen may not have official income.

Other countries use income imputation measures in this situation. For example, the tax office sees that a person has a house worth a million dollars, two cars worth one hundred thousand, etc. This corresponds to an annual income of, say, 120-150 thousand dollars a year. In England, in such a situation, an inspector of a sufficiently high level has the right to charge the taxpayer the appropriate amount of taxes. If the taxpayer does not agree, he can go to court and challenge this decision. In France the system is more formalized. There, the legal category “external signs of wealth” is used, the characteristics of which are clearly formulated, and an appropriate scale is drawn up, according to which the taxpayer’s income is calculated based on external signs.

Some rules allowing taxation by analogy with other taxpayers have been introduced into our Tax Code, but there are no tools for their implementation yet. Oddly enough, perhaps this is for the best for now: extreme caution is required in this matter. If such tools are introduced ill-considered, then one can imagine how this could be used in modern Russian conditions: political pressure, ruin of competitors, etc.

Finally, our situation is complicated by the fact that it is very difficult for a businessman to “come out of the shadows.” The scale of tax evasion is so great that the macroeconomic balance in Russia does not fully include taxes. This means that if an entrepreneur pays taxes, he may become uncompetitive compared to his competitors who do not pay. (True, if everyone started paying taxes at the same time, no one would go bankrupt.) As a result, negative selection arises: if a businessman pays taxes, he is forced out of the market.

Therefore, we should not be talking about a simple reduction in the tax burden, but about its more even distribution. The burden on the conscientious taxpayer should be eased by eliminating opportunities for both legal tax evasion through the use of benefits and illegal tax violations. In other words, reducing the tax burden should primarily occur by reducing the nominal tax burden while expanding the tax base by eliminating benefits and reducing illegal tax evasion. This is much more important for economic growth than simply cutting taxes while maintaining low levels of neutrality and fairness.

Tax system and economic growth

This idea has been discussed in Russia for quite some time: it is enough to reduce taxes, and economic growth will immediately begin.

Of course, tax cuts have an impact on economic growth, but not so clearly. And if it were possible, all other things being equal, to reduce taxes, then the economy would grow faster. Taxpayers would have more resources, they could invest them in the economy, although not necessarily in the economy of their country. However, the problem lies in the need to finance the provision of so-called public goods by the state, that is, those goods that are consumed collectively and cannot be financed by individual consumers. The most striking examples are national defense and public administration. On the other hand, there is a category of goods that are privately consumed, and in principle one could charge the consumer individually for them. For example, each student receives an education individually, but the entire society benefits from his education. It is also advisable to finance such benefits at the expense of the state.

Therefore, if we talk about cutting taxes, the question arises: will the provision of public goods remain at a sufficient level to ensure economic growth? If not, such tax cuts could have a negative impact on the national economic prospects.

Of course, when discussing this issue, we must not forget that the funds received by the state through taxes are spent efficiently. The Russian state carries out some types of expenses more efficiently, others less. This efficiency affects both economic growth and the possibility of tax cuts.

Last year, the share of government revenue in GDP was 39.6 percent of GDP. But this figure turned out to be so high thanks to oil prices: if they had been the same in 2001 as at the beginning of 2002, this share would have been, according to our estimates, about 36 percent. In my opinion, this is too much. It is unlikely that Russia can allow its state to have such a large budget. Of course, an important factor is that over the many years of socialism, our people have become accustomed to both a high level of social protection and free or preferential benefits and services provided by the state. But our state is quite capable of reducing expenses if it increases the efficiency of expenses. It is precisely this reduction in taxes - not through a sharp reduction in the role of the state, but through increasing its efficiency - that should become one of the main prerequisites for economic growth.

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[1] For more information about this, see: Sinelnikov S. G. Budget crisis in Russia : 1985-1995. M.: Eurasia, 1995; Sinelnikov S., Anisimova L. , Batkibekov S., Medoev V., Reznikov K., Shkrebela E. Problems of tax reform in Russia: Analysis of the situation and development prospects . M.: Eurasia, 1998; Problems of the Russian tax system: Theory, experience, reform / Ed. N. Alekseeva, S. Sinelnikova. M.: IET, 2000. Series “Scientific Works”. No. 19R.

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TAXES AND EQUITY COMMENTS

As is known, taxpayers are rarely satisfied with the current tax system. The “standard” set of complaints made by taxpayers, even in the richest and most prosperous countries, usually include complaints about the severity of the tax burden and the unfairness of its distribution, as well as the excessive complexity, confusion and, accordingly, lack of transparency of the tax system. This system, they believe, provides large entrepreneurs with many opportunities for tax evasion. Below we will focus mainly on the question of how our compatriots imagine a fair financial relationship between the average citizen and the state and how acceptable they consider the obligations that the current tax system imposes on them. Naturally, we will talk, first of all, about the attitude towards income tax, which directly affects the interests of all taxpayers.

However, first of all, it is worth paying attention to one feature of our fellow citizens’ perception of tax issues: respondents resolutely (and in some cases even aggressively) declared their reluctance to “delve into” the structure of the tax system, evaluate the innovations produced in it, etc. And especially This reluctance was clearly demonstrated by the participants of the Novosibirsk group, where the issue of income tax was given considerable attention:

. “I don't care. I’m still studying, and then I’ll still have to pay tax. I never get into it."

. “They calculated all these taxes for me, all the amounts, and I pay. Whether I want it or not, no one asks me.”

. “I don’t know anything and I don’t even want to know. Changes are constantly being introduced! Of course, you pay for study, taxes too: they increase there, and so do taxes.”

. “I don’t even want to talk about it, I haven’t encountered it. It is the working class that hits the pocketbook, just for everything. We don't delve into this. We were told to pay, so we pay. We will still pay these taxes.”

Respondents clearly perceive income tax as a kind of tribute that they are forced to pay to the state, as legalized robbery on the part of the latter. Answering the question of who will win and who will lose as a result of the proposed innovations in the tax sphere (innovations that in no way relate to the taxation of income - but this is not significant in this case, since the survey participants do not have and do not want to have the slightest idea about their essence), respondents state:

. “The people will lose. The state has always been at its best.”

. “If I had to take taxes, I would win. And so I lose. I’m giving away the money for who knows what.”

. “If this is a game like this, the state will probably win. They pay the tax. If we were paid, we would have money and win.”

It is obvious that the participants in the discussion do not see any connection between the taxes paid by ordinary citizens and the socially significant functions performed by the state. They do not even allow the thought that tax revenues could return to them in the form of certain services, and they seem to be firmly convinced that this money will disappear without a trace somewhere in the bowels of the state. Hence the irritation about possible innovations in the tax system and the persistent suspicion that the purpose of any innovation is solely the expropriation of ordinary citizens.

. “They have nothing to do, they make these changes every month.”

. “What do they need taxes for? Let the Duma cut its salaries, and there will be income. Otherwise, each deputy has a company, and not just one company. They lobby for their interests, nothing more. Nothing is being done for the people. Nothing.

. “One thing, then another - they make, make their own changes, they are all different. They are really only ripping us off, from the common people.”

. “If any changes are made in the government, they are not in favor of the people. We are always suffering, the middle and lower class are always suffering, in every way. They hit the pocket well."

. “The state wins, but we lose. We don't even know how much we pay. They don't tell us that you owe this much in tax. They deduct from everyone in the accounting department, and you don’t even know the amount you should receive . ”

It is worth noting that the last respondent is indignant at the fact that the “withdrawal” of income tax is carried out automatically, and refers to the citizen’s “ignorance” of what amount is withheld from him in the accounting department as a decisive argument in favor of the thesis that during this procedures, the state wins, and citizens lose - this is the same 20-year-old student who, at the previous round of discussion, said that she was indifferent to what was happening in the tax sphere and that she “never gets into it.” It is this feeling that apparently gives rise to the attitude of incompetence in matters related to taxation, which respondents so openly and aggressively demonstrate. This attitude is especially clearly declared by another participant in the Novosibirsk survey, who stated:

. “I haven’t heard anything and I don’t want to hear anything. I have already paid my taxes [the respondent, we note, is only 42 years old]. My grandmother paid, God bless her, my grandfather, a veteran, paid. Let everyone leave me alone."

An extremely expressive reference to a grandfather-veteran definitely means that this respondent perceives the collection of a tax as a kind of “assault”, an attempt, as it were, to collect an unfair “fine” from him - only in this context does the reference to the grandfather’s services to the country acquire at least some meaning.

c Public Opinion Foundation, 2002.

A story of two revolutions Structure of the tax authorities of the Russian Federation