NATALIA KORNIENKO: “TAXES – ARE INDISPENDABLE ELEMENT OF ANY STATE”
Natalia Kornienko, Head of the Tax System Development Department, Gaidar Institute, on the air of ‘Sputnik” radio station briefed on how they pay personal income tax in other countries and where progressive taxation is popular.
On August 5, 1861, Abraham Lincoln, the US President, signed an executive order on introduction of income tax. Americans were to pay 3% of income exceeding $800. Those who were better off—4-6%. One year later the norm went into effect.
Russia introduced income tax in 1916 during the First World war. The rate and scale of the tax varied 9 times and nearly always was progressive. Rich people paid more, and poor people paid less. Over recent 20 years, Russia boasts of a flat tax rate schedule—13%, however, next year changes are en route. For those who earn Rb 5mn and more the tax rate will go up to 15%.
Natalia Yurievna, people are already accustomed to pay taxes, is there a certain culture to pay taxes in the world? In days gone by population refused to accept taxation system, there were uprisings, revolutions, and principal tax-collectors underwent executions.
This is general knowledge, many books are dedicated to these issues. What is worth Jew Suss by Lion Feuchtwanger, when he invented new taxes and as a result suffered greatly. Hence of course, the history of personal income taxation was bloody in many countries. This is the case.
And why tax on income entered into practice in various countries with such difficulty? What is hard-earned—is the most important for you. I dare say, one thing is collecting duty for some activity tentatively let’s call it business, and another thing—your personal hard-earned money?
– You know, if we look at the text of scholarly papers of prerevolutionary Russian scholars then their views and tax characteristics, in particular, on tax on income, reflected contemporary trends. I mean such well-known scholars as Nikolay Turgenev and Ivan Yanzhul. They wrote even before revolution that taxes were indispensable element of any state. As N. Turgenev wrote, on the one hand, citizens while breaking free fr om slavery, acquiring ownership rights, commence paying taxes. He wrote about it in the 19th century We understand: there was Emancipation and, consequently, new participants in economic relations became free and were to learn to pay taxes. In general, phenomenon of tax—is one of the manifestations of state sovereignty, it’s always been the case. And taxes essentially were in kind and in money payments. We remember that in our history after the revolution taxes were collected in kind and researchers of that period noted that the tax can be paid both in money-terms and in kind. I mean that the tax can be levied in various forms but essentially it has a key feature—individual gratuitousness. In other words, in exchange for what the state takes, it is not obligated to provide some services, in modern language—state services. The state must undoubtedly provide public services but not as a reward for contributions made by taxpayer.
– It results that tax is payment for civilization, existence in normal, comfortable world?
– Fundamentally, yes. Because that state can’t exist without taxes.
– Sorry, since we talk about history, in my view, the state can exist without taxes. However, nowadays, probably, normal state can’t.
– Why? I will absolutely disagree with you. Such payment existed always in this or that type. What, in your view, was tithe—was it not a tax? It was precisely that. Exemptions—is one of the features of taxation. Another question: nowadays we see the difference in approaches to taxation of the population. For example, the USA boasts of an absolute tax system. If you are a citizen of that country, it is unimportant if you live on not there, you must pay taxes to your country, you must report.
– If we indulge in fantasies for a while: can we come to forms of governance when taxes will be paid by not everybody?
– I think that that would be a very unfair society. Availability of exemptions—yes. Pay tax proceeding from how much you earned—yes, but total absence of tax—all has been said by the classics.
– Natalia Yurievna, the example of Finland seems interesting to me. You say the tax is payment for what you have earned. And in Finland, for example, income tax is collected from all types of income and is paid by all who received it. It is not only wages, but dividends, pensions, social benefits, including unemployment benefit, scholarships. It is interesting that PIT includes church tax and medical insurance. The Fins have included everything into it, in other words, any operation is taxed.
– In principle, this is a certain type of justice, namely, it is unimportant from which source you got this income, but if you got it to must return part of it.
– And operations—is it convenient generally, does it not create additional bureaucracy?
– Possible, it does create bureaucracy, but it also depends on how big is your state. Let’s assume that we have a federal budget and, consequently, there are regional budgets. Finland is a small country, it is easy to count income of entire population, especially nowadays from the point of view of tax administration.
– Let’s assume the state exists, naturally, on taxes and on income. This is clear: money, treasury assets, etc. And here is an important moment which you casually mentioned. It is some social structure, which allows people to have some sense of community, in other words to be citizens and not people if you wish.
– Some population, yes, possibly, simply divided by ethnic features. Of course, tax is one of contemporary features of the state. In principle, even scholarly historical works not only in Russia but abroad proceeded precisely from the fact that nature and reasons of prosperity of many nations are based on payments which were not called taxes but fundamentally were taxes but in essence were such.
– Natalia Yurievna, in our view, which taxation rate is better for contemporary state: progressive or flat?
– This question can’t be answered categorically because it is a hard question. Undoubtedly, what is important in this option—investigate conditions in which population earn their living.
– Can we say that here an important factor is culture of tax payment?
– I would not agree. Culture is something different. In this case, we should be interested in what the state in return for obtaining tax receipts can provide for the population, what services? This includes: science, medicine, education, and pension system. Even the issue of redistribution of revenues obtained from natural resources which are in the soil. Let’s assume, in Norway taxes are high, including personal income tax. However, there is an exceptionally correct compared to other countries pension system. People feel adequately when they go on pension. And in case of disability they can maintain well-deserved way of life. In addition to that, the state distributes among population income from the sale of natural resources, i.e. it shares.
– Principle is: take – give?
– All this structure must function as a system of checks and balances. If you took then must give, if you give, it must be adequate. Because if your pension does not depend on your income—it’s also bad and violation of justice. If you work much, successfully, if you are not lazy in youth, but studied and as a result get high wages, why your pension is at the same level as the pension of that who by no means troubled himself? Finally, here we approach morality: if an individual worked he must be rewarded.
– This is in an ideal world.
– Well, there you are, you said it yourself: in an ideal world. However, it is not an ideal world. There are many states on this planet wh ere pension system has been built so and they can’t think differently.
Russia introduced income tax in 1916 during the First World war. The rate and scale of the tax varied 9 times and nearly always was progressive. Rich people paid more, and poor people paid less. Over recent 20 years, Russia boasts of a flat tax rate schedule—13%, however, next year changes are en route. For those who earn Rb 5mn and more the tax rate will go up to 15%.
Natalia Yurievna, people are already accustomed to pay taxes, is there a certain culture to pay taxes in the world? In days gone by population refused to accept taxation system, there were uprisings, revolutions, and principal tax-collectors underwent executions.
This is general knowledge, many books are dedicated to these issues. What is worth Jew Suss by Lion Feuchtwanger, when he invented new taxes and as a result suffered greatly. Hence of course, the history of personal income taxation was bloody in many countries. This is the case.
And why tax on income entered into practice in various countries with such difficulty? What is hard-earned—is the most important for you. I dare say, one thing is collecting duty for some activity tentatively let’s call it business, and another thing—your personal hard-earned money?
– You know, if we look at the text of scholarly papers of prerevolutionary Russian scholars then their views and tax characteristics, in particular, on tax on income, reflected contemporary trends. I mean such well-known scholars as Nikolay Turgenev and Ivan Yanzhul. They wrote even before revolution that taxes were indispensable element of any state. As N. Turgenev wrote, on the one hand, citizens while breaking free fr om slavery, acquiring ownership rights, commence paying taxes. He wrote about it in the 19th century We understand: there was Emancipation and, consequently, new participants in economic relations became free and were to learn to pay taxes. In general, phenomenon of tax—is one of the manifestations of state sovereignty, it’s always been the case. And taxes essentially were in kind and in money payments. We remember that in our history after the revolution taxes were collected in kind and researchers of that period noted that the tax can be paid both in money-terms and in kind. I mean that the tax can be levied in various forms but essentially it has a key feature—individual gratuitousness. In other words, in exchange for what the state takes, it is not obligated to provide some services, in modern language—state services. The state must undoubtedly provide public services but not as a reward for contributions made by taxpayer.
– It results that tax is payment for civilization, existence in normal, comfortable world?
– Fundamentally, yes. Because that state can’t exist without taxes.
– Sorry, since we talk about history, in my view, the state can exist without taxes. However, nowadays, probably, normal state can’t.
– Why? I will absolutely disagree with you. Such payment existed always in this or that type. What, in your view, was tithe—was it not a tax? It was precisely that. Exemptions—is one of the features of taxation. Another question: nowadays we see the difference in approaches to taxation of the population. For example, the USA boasts of an absolute tax system. If you are a citizen of that country, it is unimportant if you live on not there, you must pay taxes to your country, you must report.
– If we indulge in fantasies for a while: can we come to forms of governance when taxes will be paid by not everybody?
– I think that that would be a very unfair society. Availability of exemptions—yes. Pay tax proceeding from how much you earned—yes, but total absence of tax—all has been said by the classics.
– Natalia Yurievna, the example of Finland seems interesting to me. You say the tax is payment for what you have earned. And in Finland, for example, income tax is collected from all types of income and is paid by all who received it. It is not only wages, but dividends, pensions, social benefits, including unemployment benefit, scholarships. It is interesting that PIT includes church tax and medical insurance. The Fins have included everything into it, in other words, any operation is taxed.
– In principle, this is a certain type of justice, namely, it is unimportant from which source you got this income, but if you got it to must return part of it.
– And operations—is it convenient generally, does it not create additional bureaucracy?
– Possible, it does create bureaucracy, but it also depends on how big is your state. Let’s assume that we have a federal budget and, consequently, there are regional budgets. Finland is a small country, it is easy to count income of entire population, especially nowadays from the point of view of tax administration.
– Let’s assume the state exists, naturally, on taxes and on income. This is clear: money, treasury assets, etc. And here is an important moment which you casually mentioned. It is some social structure, which allows people to have some sense of community, in other words to be citizens and not people if you wish.
– Some population, yes, possibly, simply divided by ethnic features. Of course, tax is one of contemporary features of the state. In principle, even scholarly historical works not only in Russia but abroad proceeded precisely from the fact that nature and reasons of prosperity of many nations are based on payments which were not called taxes but fundamentally were taxes but in essence were such.
– Natalia Yurievna, in our view, which taxation rate is better for contemporary state: progressive or flat?
– This question can’t be answered categorically because it is a hard question. Undoubtedly, what is important in this option—investigate conditions in which population earn their living.
– Can we say that here an important factor is culture of tax payment?
– I would not agree. Culture is something different. In this case, we should be interested in what the state in return for obtaining tax receipts can provide for the population, what services? This includes: science, medicine, education, and pension system. Even the issue of redistribution of revenues obtained from natural resources which are in the soil. Let’s assume, in Norway taxes are high, including personal income tax. However, there is an exceptionally correct compared to other countries pension system. People feel adequately when they go on pension. And in case of disability they can maintain well-deserved way of life. In addition to that, the state distributes among population income from the sale of natural resources, i.e. it shares.
– Principle is: take – give?
– All this structure must function as a system of checks and balances. If you took then must give, if you give, it must be adequate. Because if your pension does not depend on your income—it’s also bad and violation of justice. If you work much, successfully, if you are not lazy in youth, but studied and as a result get high wages, why your pension is at the same level as the pension of that who by no means troubled himself? Finally, here we approach morality: if an individual worked he must be rewarded.
– This is in an ideal world.
– Well, there you are, you said it yourself: in an ideal world. However, it is not an ideal world. There are many states on this planet wh ere pension system has been built so and they can’t think differently.