Evaluation of the optimal ratio for consumption and income taxes with the use of econometric methods

Economic Annals-ХХI: Volume 177, Issue 5-6, Pages: 44-52

Citation information:
Tikhonova, A., Telegina, Zh., Babanskaya, A., & Grudneva, A. (2019). Evaluation of the optimal ratio for consumption and income taxes with the use of econometric methods. Economic Annals-XXI, 177(5-6), 44-52. doi: https://doi.org/10.21003/ea.V177-04


Anna Tikhonova
PhD (Economics), Associate Professor,
Department of Tax Policy and Customs Tariff Regulation,
Federal State-Funded Educational Institution of Higher Education «Financial University under the Government of the Russian Federation»;
Associate Professor of the Department of Statistics and Econometrics,
Federal State Budgetary Educational Institution of Higher Education «Russian Timiryazev State Agrarian University»
49 Leningradsky Ave., Moscow, 125993, Russia
AVTihonova@fa.ru
ORCID ID: https://orcid.org/0000-0001-8295-8113 

Zhanna Telegina
D.Sc. (Economics), Associate Professor,
Professor of the Russian Academy of Sciences,
Department of Production Management,
Federal State Budgetary Educational Institution of Higher Education «Russian Timiryazev State Agrarian University»
49 Timiryazevskaya Str., Moscow, 127550, Russia
zhatelegina@rgau-msha.ru
ORCID ID: https://orcid.org/0000-0001-5003-707X

Anastasia Babanskaya
PhD (Economics), Associate Professor,
Department of Economic Security, Analysis and Audit,
Federal State Budgetary Educational Institution of Higher Education «Russian Timiryazev State Agrarian University»
49 Timiryazevskaya Str., Moscow, 127550, Russia
banasti@rgau-msha.ru
ORCID ID: https://orcid.org/0000-0002-4695-1587 

Alla Grudneva
PhD (Economics), Associate Professor,
Department of Taxation and Financial Law,
Federal State Budgetary Educational Institution of Higher Education «Russian Timiryazev State Agrarian University»
49 Timiryazevskaya Str., Moscow, 127550, Russia
kokotko@list.ru
ORCID ID: https://orcid.org/0000-0001-6865-4498 

Evaluation of the optimal ratio for consumption and income taxes with the use of econometric methods

Abstract. The authors examines the dependence of tax rates by direct and indirect taxes. The research methodology is based on the authors’ approach based on the construction of scatter diagrams, as well as the use of correlation and regression analysis. To calculate regression indices, data of 2007-2018 was sampled from 87 countries (10 indicators), including countries of different types (third world, developing and developed). The authors analyse the structure of tax revenues by type of taxes in the EU, depending on the socio-economic development of the country.

The results of the analysis show no clear dependence between VAT and corporate tax rates. However, there is correlation between the rate of VAT and personal income tax. Mostly it is due to the level of socio-economic development of the countries. Economically developed EU countries replenish the state budget revenues mostly by direct taxes. However, if indirect tax rates are high, their share in the national GDP is still quite remarkable (for example, in Denmark and Sweden). Meanwhile, in developing countries there is a clear predominance of consumption taxes in GDP (Croatia, Hungary).

At the same time, there is a significant impact of political factors that are not amenable to mathematical evaluation. This, however, explains the results obtained by the authors. It has been noted that tax revenues from direct taxes prevail in developed countries, whereas developing countries prefer indirect taxes.

Keywords: Consumption Taxes; Corporate Tax; Income Tax; Tax Rate; Tax Revenue Structure; Dispersion Matrix; Correlation; Homoscedasticity; Tax Rate Elasticity

JEL Classification: Н23; C15; C51

Acknowledgements and Funding: This article was prepared with the support of the Russian Foundation for Basic Research (RFBR), project No. 18-010-00527 (2019).

Contribution: The authors contributed equally to this work.

DOI: https://doi.org/10.21003/ea.V177-04

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