In its most general form, two taxation scales can be distinguished - flat and progressive. What are their main differences, advantages and which one is more advantageous?
Flat scale of taxation. Advantages and disadvantages
A flat scale means that all taxpayers pay tax at a flat, flat rate, no matter what income they receive. This approach stimulates citizens to a higher income, as well as simplifies and increases its collection. The flat scale is used in Russia, where personal income tax is 13%.
After the reduction of the personal income tax rate in Russia from 20% (30%) to 13% in 2001, tax collections increased by almost 25%.
Nevertheless, the possible introduction of a progressive scale in Russia has recently been frequently discussed at various levels.
Supporters of the flat tax rate believe that it stimulates economic growth in the country. At the same time, a single personal income tax does not help to reduce the level of social stratification, which leads to an increase in social tension.
Progressive tax regime. Advantages and disadvantages
The progressive scale of taxation is based on the principle of increasing tax rates depending on the growth of the taxpayer's income level. According to this model, wealthier citizens pay a higher tax rate. This model is aimed at increasing social equality and assumes that those who earn big money will not become poorer after paying taxes, while the latter is taken away from the “unprotected” strata of the population to pay taxes.
On the other hand, the progressive scale is not free from disadvantages. So, in many cases, citizens simply lose the incentive to make more money. For example, the country has established a tax rate on income of more than 100 thousand per month - 30%, less - 10%.
So, a citizen with an earnings of 100 thousand will receive a net income of 90 thousand, and with an earnings of 120 thousand - only 84 thousand.
The progressive rate often leads to lower income levels and lower collection rates, as many companies are relocating production to countries with more favorable tax regimes.
The introduction in France since 2013 of a rate of 75% for citizens with incomes of more than a million euros per year provoked a massive "flight" of wealthy citizens from the country.
All this negatively affects the competitiveness of the national economy.
Features of tax regimes in the world
Most of the largest countries in Western Europe have opted for a progressive scale. So, in France, people with low income (up to 6 thousand euros per year) are exempt from tax at all, those who earn up to 11.9 thousand euros pay at a rate of 5.5%; up to 26.4 thousand euros - 14%; up to 70.8 thousand euros - 30%; up to 150 thousand euros - 41%; up to 1 million euros - 45%.
The introduction in France since 2013 of a rate of 75% for citizens with incomes of more than a million euros per year provoked a massive "flight" of wealthy citizens from the country.
In Germany, tax-free income is 8.13 thousand euros per year, for those who receive up to 53 thousand euros the rate is 14%, up to 250.7 thousand euros - 42%, over 250.7 thousand euros - 45%.
Income tax in the UK also has a progressive scale. The ceiling for tax-free annual income is 9.2 thousand pounds (about 500 thousand rubles). The marginal income tax rate is 45%.
In China, personal income tax also depends on income and varies from 5% to 45% (for earnings about 430 thousand rubles per month), income of no more than 3.5 thousand yuan (about 20 thousand rubles) per month is not taxed.
