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An Analysis of the Effectiveness of the Return to a Progressive Income Tax in Russia
Applied Economics and Mathematical Methods
From the very beginning of the introduction of the proportional tax system in Russia in 2001, the question of returning to the progressive scale of taxation is widely discussed. In this paper, relying on the existing empirical and theoretical works, the efficiency of the return to the progressive income tax in Russia from the point of the share of Russian non-observed economy is discussed for the first time. This paper solves the problem of achieving optimal welfare, which consists of redistribution incomes among the population, by searching for the optimal taxation scale, taking into account the shadow sector as an exogenously prescribed value. In order to find a solution for a choice of a tax scale, it is offered to use avaliavle information about the level of a shadow sector in the country. Particularly, the choice of an optimal tax rate is expressed in finding the optimal tax scale ad transfer depending on the existing level of shadow sector. Reducing the level of the shadow sector causes the reduction in tax evasion, as a result the government would increase tax rate and transfer (so the progressive system is more efficient). Increasing the level of the shadow sector, vice versa, causes the growth of tax evasion, so that the government reduces tax rates and transfer (it is less effective to use the progressive tax system and at some point it is better to switch to a proportional system). Having made the analysis of Russian economic state, we make a conclusion that for now it is better to use proportional tax system in Russia.