Abstract
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Background
From 2013 the public bodies of EAEU Member States began the public discourse about the legal status of the self-employed people and their taxes. One by one, they launched an idea: to reduce the shadow economy, we may need special incentives to nudge the unregistered entrepreneurs into legal field – a simple way of registration and low tax burden.
First was the Ministry of economy of Russia, which proposed in 2014 that the individuals, who perform certain personal services (private tutors, gardeners, housecleaners, nannies etc.), buy monthly patents for RUB 1,000 (about EUR 24, or 3.3% of average monthly salary) instead of registration as individual entrepreneurs, filing personal tax returns and paying tax at general 13% rate – which most of them never did. This suggestion was met with mixed response and was not implemented.
Then from 1 January 2017 Armenia introduced personal tax exemption for self-employed (along with the individual entrepreneurs), whose annual income was under AMD 9 million (EUR 16,925). From the same date Russia introduced the special tax registration for the individuals, who perform personal services (same as in 2014 proposal), while exempting their income from the personal income tax. In both cases, the success was moderate.
In 2019 both Kazakhstan and Russia introduced the new extremely simple tax regimes for self-employed. Kazakhstan opted for fixed-amount tax, while Russia preferred gross income tax approach. Belarus followed Russian example from 2023.
(The fifth EAEU Member State, Kyrgyz Republic, has been quietly employing lump-sum “patent tax regime”, effectively similar to the above, since mid-1990-s).
However, different political actors suggested different grounds for introduction of the special tax regimes for self-employed, e.g.:
- legalization of self-employed and reduction of shadow economy;
- additional budget revenues from those coming out of shadow economy;
- reduction of tax burden for low-income entrepreneurs.
There appeared immediate critique along the following lines:
- it is reallocation of public expenditure to low-income people;
- it hinders the budgetary revenues, as existing entrepreneurs would prefer new regime.
Over last years the tax and other authorities accumulated some statistics on the results of these tax regimes. So the author would like to analyze and compare the results of these initiatives in four EAEU Member States (except Belarus, where the regime has just been introduced): how popular they became and what were the budgetary effect of these tax regimes.
Research questions
How different is tax burden under special tax regimes for self-employed in EAEU Member States in comparison to general tax regime?
What is the respective tax gap in EAEU Member States?
Data and methodology
Methodology of this research includes two main approaches.
First, a comparative legal analysis of law provisions – what are criteria, limitations and main elements of these regimes.
Second approach is the economic analysis – assessment of tax burden for the self-employed people, review of statistics on number of self-employed and respective tax revenues, review of opinions on results of such regimes. The intended data sources are statistics accumulated by tax and other authorities, as well as existing research.
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