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La fiscalità nella federazione russa: fondamento e giustificazione economica di imposte e tasse

Gavrilova Irina Alexandrovna

Makarova Olga Alexandrovna

 Il gettito fiscale è circa il 70% delle entrate statali nel mondo ed anche in Russia. Lo Stato e le proprie agenzie sono interessate a far sì che il gettito fiscale risulti perfettamente incanalato nel bilancio. Pertanto, essi fanno di tutto per minimizzare il nichilismo giuridico conseguente al mancato pagamento dei tributi. Allo stesso momento, le agenzie statali devono introdurre tributi in stretta aderenza ad un’efficiente normativa fiscale. Inoltre, esse non dovrebbero ignorare la natura di imposte a livello concettuale. L’articolo si focalizza sul principio della base economica di tassazione, che è un importante principio in questo settore. Il suo meccanismo viene analizzato in relazione alla giustificazione economica (di fattibilità) di regolamentazione giuridica di tasse e contributi. A titolo di esempio, viene discussa l’imposta sul patrimonio, che è attualmente al centro del dibattito pubblico.

PAROLE CHIAVE: tributi - fondamento e giustificazione economica - disciplina giuridica - Stato - imposta patrimoniale

Taxation in the russian federation: economic basis and economic justification of taxes and fees

Tax revenue amounts to more than 70% of the total State revenue both globally and in Russia. The State and its agencies are interested in the revenue being seamlessly channeled to the budget. Therefore, they struggle to minimize the legal nihilism resulting in failure to pay taxes. Meanwhile, State agencies must introduce taxes in strict adherence to the effective tax legislation. Furthermore, they should not ignore the nature of taxes as a concept. The article is focused on the principle of the economic basis of taxation, which is a major one in this sphere. Its mechanism is analysed in relation to the economic justification (feasibility) of legal regulation of taxes and fees. By way of illustration, we discuss the wealth tax, which is one of the most publicly debated today.

Keywordstaxes, economic basis and economic justification, legal regulation, State, wealth tax

1. Theoretical grounds

The fundamentals of legislation on taxes and fees are contained in art. 3 of the Tax Code of the Russian Federation (Tax Code) [1]. The principle of economic basis of taxation is one of the special principles set forth in art. 3. The legal doctrine also knows this principle, though applies a different na­me (“economic justification”).

The Tax Code provides that taxes and fees shall have an economic basis and cannot be arbitrary (Cl. 3, art. 3). The economic basis means that every tax shall apply to a certain taxable item, such as: transactions involving sale of goods, fulfilment of work or supply of services; property; profit; income; cost of goods sold, works fulfilled or services supplied; etc. The list is not exhaustive and can include anything that can be measured in terms of cost, quantity or physical parameters. In Russian law, a taxable item is a certain le­gal act that gives rise to an obligation to pay taxes. Such legal acts include actions (e.g., transactions, sale of goods), events (e.g., donations), and statuses (ownership or other property rights). In terms of economic basis, the law stipulates that any taxable item shall imply the availability of certain material assets, benefits, property gains, or a taxpayer’s business activity. L. Osterloh and A.T. Jobs argue that «… taxation must be linked to a taxpayer’s solvency – i.e., ownership, possession or use of property. Thus, taxation is a common burden that involves all residents in financing state goals, while the degree of involvement depends on their earnings, property, and purchasing power» [2].

According to the principle under consideration, taxes and fees must be levied with due regard to the economic situation and feasibility. They must conform with budget planning and the political objectives proclaimed. Taxes and duties should be imposed after a comprehensive expert evaluation and statistical analysis of a state’s financial affairs. Importantly, the total amount of a state’s expenses (the state’s need to raise revenue) cannot be the determining criterion. In other words, the budget deficit as such (i.e., the lack of financial means) cannot be a sufficient economic basis for taxes and fees, though it certainly exerts an impact on the entire architecture of a tax system [3].

In this respect, Ruling of the Supreme Court of the Russian Federation dated 17 November 2004 on Case No. 9-G04-24 is of particular interest. The Supreme Court ruled that Cl. 3, art. 3 of the Tax Code sets forth that taxes and fees shall have an economic basis, not economic justification, and that the Tax Code does not make it mandatory to include economic justification to texts of tax laws [4]. Furthermore, the rule on economic basis governs the tax as such and does not apply to its particular elements. As noted by I. Zu­banova, it is the principle of economic basis that «can be a defence line of argument in commercial court disputes with taxing authorities» [5].

According to Yu. Krokhina, the principal of economic basis has two dimensions. First, taxes must be efficient – that is, the funds accumulated by the government from each particular tax must exceed the tax authorities’ad­ministrative expenses (collection, management and control). Second, taxes and their elements must take into consideration the macro- and microeconomic consequences for the state or particular industry (e.g., tax burden for a manufacturer) as well as for a certain taxpayer [6].

Therefore, the principle of economic basis should be implemented so as to ensure financing of state affairs at both federal and municipal levels [7].

Interestingly, tax law theorists often comment this principle to arrive at opposite conclusions. Specifically, some scholars argue that «the economic basis equals the economic justification (feasibility) of taxes and implies, first and foremost, efficiency and self-repayment – that is, the state must raise more funds under each particular tax that its spends on its administration (collection, management and control)» [8].

Others believe that the economic basis is tightly connected to the notion of tax sovereignty: «The requirement of an economic basis for any tax is intended to curb the so-called tax arbitrariness of the state – that is, when the state imposes taxes based solely on fiscal considerations and aims to raise revenue at any cost. The state’s need in financial resources does not, by itself, suffice for introducing a new tax or fee» [9].

According to A. Kozyrin and A. Yalbulganov, the concept of economic basis must be directly linked to the concept of taxable items. D. Vinnitsky argues that the principle of economic basis is characterized by the proportionate limitation of economic interests of private persons. In terms of fees and charges, the principle ensures, inter alia, the adequacy of a fee or charge compared to those services, rights or benefits obtained by a person in return [10].

Svistunov notes that Russia’s taxation policy has always ignored the principles of economic theory. The entire history of taxation proves that the amount of taxes collected has never been assessed against the real economic and financial resources of direct manufacturers. The taxes and duties were introduced and collected in the manner of pronounced imperative absolu­tism. Contrary to Western market-driven democracies, Russia’s authoritative state has traditionally determined the entire structure and development of financial and economic policy[11]. Regrettably, today the tradition persists, and the legal rules are not underlain by economic analysis. The controversy between lawyers and economists is not rare: the analysis of the same social phenomena makes them draw conclusions running counter to each other.

F.A. Hayek argues that «nowhere is the baneful effect of the division into specialisms more evident than in the two oldest of these disciplines, economics and law. … the rules of just conduct which the lawyer studies serve a kind of order of the character of which the lawyer is largely ignorant; and … this order is studied chiefly by the economist who in turn is similarly igno­rant of the character of the rules of conduct on which the order that he stu­dies rests» [12]. Lawyers ceased to understand the economic vocabulary, have no knowledge of the fundamental principles of microeconomics, and do not follow scholarly discussions in economics. In their turn, economists for some time (at least until 1970s) lost interest in legal matters and regained it only later. However, even the new institutional economics does not prevent economists from not paying due attention to multiple important nuances, which largely hinders the awareness about the economic dimension of the legal issue in question [13].

2. How the economic basis of taxes works: Practical conclusions

Today taxpayers possess no effective leverage that would allow them to influence the taxation system. However, that has not always been the case: the history of taxation provides good examples of the opposite. The current situation results from the state’s unwillingness to empower taxpayers and let them impact decision-making in this sphere.

The fairness and justification of taxation have been the focus of scholarly interest for a long time. There emerged a number of approaches in attempt to ensure a fair taxation structure: a lump-sum tax that eventually proved inef­ficient (F. Quesnay, W. Petty, A.R.J. Turgot); a proportional tax that favours more affluent classes (P.P. Leroy-Beaulieu, J. Locke, R. Stourm); a progressive tax that is most beneficial for poorer classes. The proportional tax structure is fairer and more efficient in terms of economics, but impedes solution of social tasks faced by the state. The progressive tax, in its turn, is more preferable in social terms, but undermines the economic incentives of taxpayers [14].

The possible introduction of a progressive rate for personal income tax is an extremely topical issue in today’s Russia. The personal income tax is go­verned by Chapter 23 of the Tax Code. It was introduced in Russia in 2001 to replace a progressive tax rate. The current flat rate of 13% is quite attractive, since it simplifies payment of the tax and reduces administrative costs.

Obviously, the rise of personal income in a country entails the increase of tax revenue in absolute terms, but not only. At some point, there also arises the question of raising the tax rate itself. Currently, it is the progressive rate that is used in most of developed economies. Importantly, the personal income tax is a major federal tax – it is a direct tax that is channelled to regio­nal budgets in full. In terms of government revenue, it occupies the third pla­ce after VAT and the corporate tax.

The possible progressive rate of the personal income tax has been on Russia’s political, economic and social agenda since the very date the flat rate was introduced in 2001 (Chapter 23 of the Tax Code). Back then, both the decrease of the tax rate (from 30% down to 13%) and the rate’s flat value constituted an extremely important, not to say revolutionary, decision. Furthermore, the decision was viewed upon as quite controversial. However, it resulted in a dramatic increase of funds collected.

Today many argue that it is unfair to apply the same 13% tax rate to any income, big or small. However, we should ask ourselves what results a progressive tax might attain. Russia already experimented with a progressive tax on personal income. This led to a surge in salaries undeclared to tax authorities – that is, with only part of the income being officially reported and the other being illegally received in cash (“in envelopes”).

The return to the progressive rate is hardly desirable, because it cannot be properly administered. Moreover, this will not eradicate the problem of low wages: for certain groups, both the wages and the taxes will remain mi­nimal. Eventually, this will endanger funding of pension schemes. Therefore, the progressive tax will not contribute to social justice.

The possible architecture of the progressive tax on personal income in Russia should hinge on three major principles:

  1. different approaches for different income levels;
  2. income and excessive income should be distinguished;
  3. tax brackets should be as small as possible.

Earned income (active income) includes income derived from employment, self-employment, business activity, creative work or any other perso­nal activity of a taxpayer (e.g., salaries, payments under subcontracts, author’s or patent royalties, etc.). For instance, Israel carried out a tax reform in early 2000s that aimed, inter alia, at directly cutting taxation of income derived from employment. This was intended to give additional momentum to the country’s economic activity.

Unearned income (passive income) includes income not linked to a taxpayer’s personal activity (dividends, interest on deposits, rental payments, gifts, capital gains, lottery winnings, inherited property, expenses exceeding income, etc.).

Should the adoption of the progressive tax on personal income become inevitable, we need to contemplate what this tax should look like.

For the purposes of personal income tax, the tax base is calculated for the entire income a taxpayer receives in money, in kind or as material benefit. That is why the progressive rate should only be applied to passive income, with the tax bracket being determined depending on the type of income (gift, antiquities, property, vehicles, etc.). Meanwhile, the active income should continue to be taxed at a flat rate of 13%. In this case, the tax brackets for progressive tax on passive income might be 15%, 17%, 19%, 20% and, for excessive income, 25-30%.

The term “excessive income” implies that it is incomparable to any stan­dard level. The size of such income should be truly enormous and extraordinary. It also seems advisable to break down excessive income in several tax brackets: 12-120, 120-360, and >360 million roubles per annum [15].

In practical terms, the proportional rate of 13% seems quite attractive, because it simplified collection of the personal income tax and reduced administration cost [16].

However, progressive taxation is not always fair in social terms. Hence the proposals to introduce the wealth tax in Russia. For instance, the State Duma’s Budgeting and Tax Committee brought in Bill No. 66360-6 «On amending art. 13, Part 1 of the Tax Code of the Russian Federation and amending Part 2 of the Tax Code of the Russian Federation» in 2012, pro­viding for a new federal tax on luxury items.

According to the bill, the wealth tax shall apply to both legal entities and physical persons, including sole traders. The taxable items encompass mo­vables (motor cars, aircrafts, helicopters, motor ships, yachts, sail boats, motor boats) and real estate (residential units, land plots). The list does not include property used by a taxpayer to conduct business activity.

Russia’s Ministry of Economic Development offered to impose the wealth tax on real estate over 1000 square meters and motor cars with engine power exceeding 200-250 hp. Elvira Nabiullina, former Minister for Economic Development and now Assistant to the President, explained: «[For the purpo­se of taxation], the area of different facilities owned by a person will not be put together. For the wealth tax to apply, a person shall have one facility over 1000 square meters» [17]. Nonetheless, it seems wrong to assess financial welfare of a person based exclusively on one taxable item which, for example, might be owned by way of inheritance. The law should provide for a comprehensive assessment of a person’s assets. Furthermore, real estate can be more adequately valued not in square meters, but by total price of a facility, because prices in Moscow and in provinces differ dramatically.

Any tax must repay itself – that is, the revenue raised must exceed the tax authorities’administrative cost. However, there is a question: will the wealth tax repay itself? One the one hand, the money paid by owners of luxury items will be quite large and can much contribute to the state’s budget. On the other hand, we should first ascertain the number of people in possession of luxury items. Importantly, this number will depend on the notion of “luxury” we will use as a guideline. If by luxury items we imply premium motor cars and other extremely expensive property (e.g., villas, yachts, etc.), the number of taxpayers will be quite limited. Moreover, a disproportionately high tax rate will lead to concealment of property and tax avoidance. In this event, affluent people may flee the country, as is the case in France and so­me other EU states. Meanwhile, a lower tax rate can hardly be truly beneficial for the budget.

Initially, the wealth tax was meant to be imposed on both luxury real estate and expensive motor cars. However, the tax was eventually applied only to luxury vehicles (those over 3 million roubles) [18]. Effective 1 January 2014, certain motor cars will be taxed using surcharge (multiplier) set forth in Cl. 2, art. 362 of the Tax Code.

In 2014, taxpayers were to pay surcharge only once per annum, while advance payments were calculated at the standard rate. In 2015, Cl. 2.1 of art. 362 was amended in a major way: legal entities shall now calculate advance tax payments at the end of each reporting period as ¼ of product of tax base and tax rate with the surcharge applied.

As early as first quarter of 2015, the advance payments for transport tax began to be calculated under the following formula:

Tadv  = 1/4  ´ TB ´ TR ´ S, where:

Тadv – transport tax advance payment;

TB – tax base;

TR – tax rate;

S – “luxury” surcharge (multiplier coefficient).

In order to implement Cl. 2, art. 2 of the Tax Code, Russia’s Ministry of Industry and Trade adopted a special instrument: Regulations on Determi­ning Average Cost of Passenger Vehicles for Transport Tax Purposes [19]. Fur­thermore, the Ministry shall annually (not later than 1 March) upload the list of passenger vehicles over 3 million roubles to its official web-site. The recent list has been uploaded in 2015, and it is significantly larger than the last year’s one. Currently, it includes 166 models costing 3 to 5 million roubles, 72 mo­dels costing 5 to 10 million, and 17 models of the most luxurious vehicles over 15 million (in 2014, the total number of models was only 191) [20].

3. Conclusions

The analysis of all recent legislative trends characterizing Russia’s legal system allows to make the following conclusion. The policymakers, regrettably, often confuse such concepts as “economic basis” and “economic justification” of taxes and fees. This confusion is vividly illustrated by the legislator’s specific focus on certain taxable items – in particular, “luxury items”. Noteworthily, the concept of luxury can be extended to include a larger num­ber of taxpayers, but there is a question: will not it create a burden on the population that is simply too hard to shoulder? Expectedly, such an exten­ded concept will not include first necessity goods. This is exactly the distinction drawn by Adam Smith in The Wealth of Nations – that is, the necessaries and luxuries of life. However, we should note that the commodity bun­dle in Russia is much more meagre than in many European states. Therefore, the concept of luxury might well include all goods purchased by those slightly above the poverty line. Again, it cuts both ways: such approach mi­ght result in massive tax avoidance.

In conclusion, we find it appropriate to cite Prof. A. Blankenagel, an advocate of economically sound taxation: «a tax must not create economic ob­stacles and encourage inadequate expenses or production; nor must it encourage a loss or abandonment of public wealth» [21]. That is, the state must exert the least possible influence on economy and people’s private life. This was noted already by Frederic Bastiat: «We ought to be governed not according to the hidden intentions of the government but according to intentions that are known and approved. It is up to the cabinet to set out, propose, and take the initiative, up to us to judge it, accept or refuse it. But in order to judge, we need knowledge. He who climbs onto the driving seat and takes the reins is declaring by this very act that he knows or thinks he knows the destination to be reached and the route that must be taken. At the very least he should not keep destination and route a secret from the tra­vellers when these travellers form the whole of a great nation. If there is no plan, let him judge for himself what he must do. In all eras government calls for an idea, and this is especially true today» [22].

Note

[1] The Tax Code of the Russian Federation (Part 1), Federal Law n. 146-FZ of 31 July 1998, Rossiyskaya Gazeta [Russian Newspaper] nn. 148-149 (6 June 1998).

[2] OSTERLOH-JOBS, Konstitutsionnye printsipy nalogov i sborov v FRG [Constitutional principles of taxes and fees in the Federal Republic of Germany], in Nalogovoe pravo v resheniyakh Konstitutsionnogo Suda Rossiyskoy Federatsii v 2003 [Tax law in decisions of Constitutional Court of the Russian Federation in 2003], Moscow, 2004, p. 99.

[3] TEREKHINA, Pravovye printsipy nalogooblozheniya [Legal principles of taxation], in Finansovoe pravo [Finanacial law], n. 5, 2012, pp. 33-39.

[4] Ruling n. 9-G04-24 of the Supreme Court of the Russian Federation of 17 November 2004.

[5] ZUBAREVA, Printsip ekonomicheskogo osnovaniya nalogov – eto skrytoe oruzhie nalo­goplatelshchika ili deklarativnaya norma [The principle of economic basis of taxes: A taxpayer’s secret weapon or a declarative statement], in Vash nalogovy advokat [Your tax attorney], n. 5, 2009.

[6] KROKHINA, Printsip ekonomicheskoy obosnovannosti naloga v pravovykh pozitsiyakh Konstitutsionnogo Suda RF [The principle of economic justification of taxes in legal opi­nions of the Constitutional Court of the Russian Federation], in Nalogoved [Tax Expert], n. 7, 2004.

[7] See: MAKAROVA, Ekonomicheskaya obosnovannost pravovogo regulirovaniya nalogov [Economic justification of legal regulation of taxes], in Kapitalizm i svoboda: sbornik statey [Capitalism and freedom: Collected works], ed. P.V. Usanov-D.V. Nefedov et al., St. Petersburg: Nestor-istoriya, 2014, pp. 206-225.

[8] BOYTSOV-DOLGOVA-BOYTSOVA, Postateyny kommentariy k chasti pervoy Nalogovogo kodeksa Rossiyskoy Federatsii [Paragraph-by-Paragraph Commentary to the Tax Code of the Russian Federation], Moscow, GrossMedia, 2006.

[9] KOZYRIN-YALBULGANOV (eds.), Kommentariy k Nalogovomu kodeksu Rossiyskoy Fede­ratsii (ch. 2) (postateyny) [Commentary to the Tax Code of the Russian Federation (Part 1) (paragraph-by-paragraph)], accessed through KonsultantPlus legal database.

[10] VINNITSKIY, Osnovnye problem teorii rossiyskogo nalogovogo prava [Major issues in the theory of Russia’s tax law], Post-doctoral thesis, Ekaterinburg, 2003, p. 31.

[11] SVISTUNOV, Problemy postroeniya nalogovoy politiki gosudarstva v protsesse evolyutsii printsipov nalogooblozheniya [Problems of shaping the state’s taxation policy in the process of evolution of taxation principles], in Istoriya gosudarstva i prava [History of state and law], n. 8, 2006.

[12] HAYEK, Pravo, zakonodatelstvo i svoboda: sovremennoe ponimanie liberalnykh printsi­pov i spravedlivosti i politiki [Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy], Moscow, 2006, p. 23.

[13] KARAPETOV-SAVELEV, Teoreticheskie, istoricheskie i politico-pravovye osnovaniya print­sipa svobody dogovora i ego ogranicheniy [Theoretical, historical, political and legal grounds of the freedom of contract and its limits], vol. 1 of Svoboda dogovora i ee predely [Freedom of contract and its limits], Moscow, Statut, 2012.

[14] KROKHINA (ed.), Nalogovoe Pravo Rossii [Tax law of Russia], Moscow, 2011, p. 93.

[15] CHAYKOVSKAYA, Problemy nalogooblozheniya v rossiyskoy ekonomike (Po materialam Vserrossiyskoy mezhvuzovskoy nauchno-prakticheskoy konferentsii)[Issues of taxation in Rus­sia’s economy (based on Proceedings of National Intercollegiate Research Conference)], in Vse dlya bukhgaltera (Accountant’s Toolbox), n. 4, 2011, pp. 7-15.

[16] MAKAROVA, Aktualnye problemy nalogovogo prava v Rossii [Topical issues of tax law in Russia], in Aktualnye problemy pravovogo regulirovaniya ekonomicheskoy deyatelnosti v Rossii i Kitae [Topical issues of legal regulation of business activity in Russia and China], St. Petersburg, 2012, pp. 235-242.

[17] BARSEGYAN, Roskoshny nalog [The wealth tax], in EZH-Yurist [Lawyer E-Journal], n. 23, 2012, p. 2.

[18] Federal Law n. 214-FZ of 23 July 2013 “On amending art. 362 of Part 2 of the Tax Code of the Russian Federation” (effective 1 January 2014), Rossiyskaya Gazeta [Russian Newspaper], n. 161 (25 July 2013).

[19] Order of the Ministry of Industry and Trade n. 316 of 28 February 2014 “On Adopting Regulations on Determining Average Cost of Passenger Vehicles for Purposes of Chapter 28 of the Tax Code of the Russian Federation”, Rossiyskaya Gazeta (Russian Newspaper), n. 80 [9 April 2014].

[20] YAKOVENKO, Avansy po transportnomu nalogu: ‘roskoshnye’ nyuansy [Advance payments of the wealth tax: ‘Luxurious’ nuances], in Informatsionny byulleten Ekspress-bukh­galteriya [Express Accountancy Information Bulletin], n. 13, 2015, p. 15.

[21] BLANKENAGEL, Ekonomicheskaya sushchnost naloga i ee pravovoe znachenie [Economic nature of taxes and its legal meaning], Nalogovoe pravo v resheniyakh Konstitutsionnogo Suda RF 2008 goda: po materialam VI nauchno-prakticheskoy konferentsii 17-18 aprelya 2009 goda [Tax law in decisions of Constitutional Court of the Russian Federation in 2008: Proceedings of the 6th Research Conference 17-18 April 2009], S.G. Pepelyaev ed., Moscow, 2010.

[22] BASTIAT, Protektsionism i kommunism [Protectionism and Communism], trans. Yu.A. SHKOLENKO, Chelyabinsk, Sotsium, 2011, p. 283.