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The ability of taxpayers to shift the tax burden to their counterparties largely depends on the nature of the market in which they interact. In the case where the market is competitive, the possibility of shifting the tax burden is determined solely by the ratio of the elasticity of supply and demand. Next, we will consider the situation using the example of markets with absolutely inelastic and absolutely elastic demand and supply. In our example, a tax is set at a fixed amount per unit of goods or services, i.e. specific tax.
Obligations for value taxes are established based on the value of the object of taxation, for specific taxes - per unit of goods or services. For example, a specific excise tax on tobacco products requires payment of a fixed amount for each pack sold, i.e. tax liabilities are determined in relation to physical rather than monetary indicators.
Let's consider the option in which demand is absolutely elastic (Fig. 11.1a). The supply curve shifts upward, but consumers are not willing to pay a price higher than R 0 . In this case, their reaction is expressed in a decrease in the amount of consumption of this product from Q0 before Q 1. Sellers who are unable to include the tax in the price of goods will be forced to pay it by reducing their own income. Moreover, if before the introduction of the tax the revenue was P Q Q Q , then after the introduction the revenue volume decreased to P 0 Q l. It is important to note that sellers only account for the difference (P 0 Q 1 – UQ 1). As a result, the tax burden was placed on sellers. At the same time, buyers also face certain problems. Although the tax burden does not apply to their cash income, they have to find a substitute for the good as their consumption decreases.
If demand is completely inelastic, the volume of purchases does not depend on price. This case is rarely encountered in taxation practice (Fig. 11.1b).
In Fig. Figure 11.1b shows how the equilibrium point shifts after the introduction of a tax. If tax obligations are assigned to suppliers, then the introduction of a specific tax in the amount U leads to a proportional increase in costs for each unit of goods. In this case, the supply curve shifts upward by the amount U. Taking into account the factor of demand inelasticity, buyers will be forced to accept the price P 1= P 0+ U, and tax burden of P 1 P Q E Q E 1
Another option we are considering is a market with absolutely elastic supply (Fig. 11.2 a). In this market, sellers have the ability to unlimitedly change the volume of supply, so they will sell the product at a price that compensates them for the increase in costs. In this case, supply will decrease and price will rise to R 1, when buyers will bear the entire tax burden of UQ 1. All tax will be included in the price (P 1= P Q+ U). But even in this situation, sellers may be the losers, since previously they were able to sell a larger quantity of goods at the same price level, but now they have to switch to trading in other types of goods.
In the case of a completely inelastic supply (Fig. 11.2b), sellers cannot influence the market situation, since they do not have the ability to respond to increased costs by reducing supply. The supply curve “shifts up” while remaining the same. Buyers experience no change because the equilibrium point remains the same, and the tax burden falls entirely on sellers, whose net income is reduced.
If not a specific, but a value tax is used, then practically nothing will change. Thus, the shift in the supply curve will not be characterized by the number U, but a function that will reflect certain features of tax obligations. For example, if suppliers of a product or factor of production are required to pay a proportional tax at the rate t (0 < t < 1). Это может быть акциз или один из обязательных платежей, который взимается пропорционально величине фонда заработной платы. Включенный в цену налог составит величину tP.
If demand is completely inelastic or supply is completely elastic, the price will be equal to P1 - P Q = tP 1. That is, after the introduction of the specified value tax, equilibrium will be established at a price equal in value P 0 / ( 1 - t), and the tax included in it will be tP0 (1– t). The amount of tax liabilities transferred to consumers in the first case is equal to tP 0 Q Q /(1 –t), and in the second - tP0Q1 / (1 – t).
If supply is absolutely inelastic or demand is elastic, the price includes a tax equal to t P0. Additional costs for sellers due to the application of this type of taxation will accordingly amount to: tP Q Q l And tP 0 Q Q , and the meaning Q 1 may vary and will depend on the nature of the demand function.
The situations we considered above make it possible to identify a general pattern, namely, in a competitive market for a particular product or service (including labor), the party that will have an advantage in the elasticity of the volume of transactions by price has the opportunity to shift the tax burden to the counterparty. Thus, for sellers, the allocation of a tax means an increase in costs, and they, adapting to this tax, are forced to reduce supply. In turn, for buyers, the introduction of a tax implies an increase in prices, to which they can adapt by reducing demand.
The result will be determined by the extent to which each party is willing to sacrifice part of the volume of transactions for a given product, replacing it with another, and thereby preventing the loss of monetary income.
Conclusion: the distribution of the tax burden depends largely not on which party is directly charged with tax obligations, but, as noted above, on the elasticity of the volume of transactions. Let's look at this using the example of a specific tax. Let us assume that the demand and supply functions near the equilibrium point can be depicted by straight lines.
If tax obligations are assigned to sellers, the supply curve will shift parallel upward by a distance U. When balance is achieved E 1 sellers must pay the tax, and at their disposal, as can be seen in Fig. 11.3 a, remains P 1 s.
When equivalent obligations are assigned to buyers, then, as can be seen in Fig. 11.3 b, the demand curve shifts parallel downwards by the same distance U.
In this case, equilibrium can be reached at a different point, since transactions will be concluded at a price that does not include tax. At the same time, having paid sellers P1, buyers must fulfill their obligations to the state by paying tax U for each unit of goods. As can be seen from Fig. 11.3b, a unit of goods costs them P 1 D .
The triangles shaded on both charts are equal to each other (their bases facing the vertical price axis are equal U, and the equality of the angles is specified by the parallelism of the axis). The height of the triangle reflects the reduction in the volume of transactions and is the same in both cases. As a consequence, points P 1 And P 1 s on the first graph (see Fig. 11.3 a) correspond to the points P 1 D And P 1 on the second graph (see Fig. 11.3 b).
It should be especially noted that monetary losses per unit of goods for sellers in the first case will be equal to the value of the segment P Q P ] S , and in the second - the segment P Q P 1. The losses of buyers are also equal.
Conclusion: the real economic consequences of taxation (reduction in sales and loss of income) depend on the relationship between the elasticity of supply and demand and the amount of taxation, and not on which party the law imposes the obligation to pay the tax. This statement is true for both specific tax and proportional taxation of goods and services. It must be borne in mind that if the tax liability is imposed on buyers, then the price paid to sellers will not include tax, for example, in contrast to the situation where the tax liability is imposed on sellers (period E1 in the second graph is lower than in the first). In case of equality of the proportionality coefficient t at different prices, it is obvious that tax payments will be different, so it is possible to compare options for burden distribution only in relative, not absolute, terms. If the government expects to collect a fixed amount of tax revenue through proportional taxation, the option in which the tax is imposed on the buyer involves setting a higher rate than in the case when the tax liability is imposed on the sellers.
At the same time, the shares of sellers and buyers in the distribution of the tax burden in a competitive market will ultimately be determined by the nature of the supply and demand curves, and not by the size of formally assigned obligations. It is these shares that are the relative values that characterize the distribution. With an absolute fixed amount of tax deductions, they also determine the size of absolute losses for each party. These dimensions will obviously be invariant with respect to the distribution of liabilities.
Payments to social and health insurance funds can also be used as an example. In many countries, tax liabilities are shared between employers and employees, with each party's share being the subject of intense political debate. At the same time, if the labor market situation is favorable for workers (the elasticity of supply is much higher than the elasticity of demand), employers will not be able to shift most of the burden of insurance payments onto them. In contrast, when employers are in an advantageous position (the elasticity of labor supply is relatively low and the elasticity of demand is high), then, faced with the obligation to make payments, they will be able to shift a significant part of the burden to workers by reducing wages relative to them.
In the short term, changing the nature of tax obligations can bring real benefits to one of the parties. This is explained by the fact that the movement does not occur instantly; in practice, it requires time and sometimes significant transaction costs. Therefore, the less stable the tax system as a whole is, the more intense the struggle for temporary benefits is.
32. Distribution of the tax burden in a competitive and monopolistic environment.
Tax obligations(burden) – obligations established by law to pay taxes. Specific tax– a tax calculated by multiplying the rate expressed in monetary units by the number of taxed goods expressed in natural units. Value tax– calculated by multiplying the rate, expressed as a percentage, by the value of the goods. According to the specific weight of the tax payment, taxes are divided into progressive (growing faster than income), regressive (slower) and proportional (constant regardless of the amount of income).
The totality of individuals who actually bear the tax burden , i.e. those whose situation, other things being equal, worsens due to the introduction of this tax, represents scope of the tax.
Discrepancies between legally established area of tax obligations(circle of payers) and economic scope of the tax are determined shifting the tax burden. The movement mechanism is based on interdependence market participants. The ability to completely or partially escape the scope of a tax by shifting the burden to others obviously depends on flexibility of economic behavior. Flexibility is manifested in reducing your participation in transactions, the profitability of which is reduced due to taxation, without large losses.
Tax shifting in a competitive product market
Tax obligations imposed on the payer do not always coincide with the real tax burden that he is forced to bear. The reason for this is that the introduced taxes affect the behavior of sellers and buyers and, ultimately, the general equilibrium in the market. It is in the markets that the tax burden shifts, which leads to discrepancies between the legally established scope of tax obligations and the economic scope of the tax. Moreover, this happens differently in different markets. Let's look at how this movement occurs in a competitive market.
Let a certain product, demand curves (D) and the proposals (S) of which are presented in Fig. are taxed in the amount of t rubles. per unit of sales. If the tax obligation is assigned to sellers, it corresponds to the movement of line S up by a distance t to position S"; if the obligation is borne by buyers, this corresponds to the movement of line D down by the same amount to position D". Under the influence of the tax, the initial equilibrium E0 and price P0 are replaced with new ones.
Ed1– Sellers pay the tax. ES1– Buyers pay the tax. The distribution of the tax burden between sellers and buyers is determined by the ratio of absolute values DPd And DPs, Where DPd = Рd - Р0, A DPs = Ps - P0. In essence, this means relatively greater flexibility in the market behavior of sellers compared to buyers in the area Q1Q0, demand is more price elastic than supply.
With perfectly inelastic demand, the entire tax burden falls on the consumer. At the same time, it is clearly seen that in the general case the elasticity advantage favors shifting the tax burden. This is true regardless of whether the tax is specific or value-based. The proof is in the graph below, because with a value tax, the distribution of the tax burden between sellers and buyers is still determined by the ratio of absolute values dРd And dРs It, in turn, depends on the relationship between the elasticities of demand and supply, and not on how exactly the tax is calculated. But there is a peculiarity when using the value tax. If the tax is paid by the seller, then the tax liability (interest rate) is determined in relation to Рd , and if the buyer - to Rs. The same value of the difference Pd and Ps corresponds to different tax values depending on who is in the sphere of obligations. To collect the same amount, the government needs to set a higher share of deductions from sellers' prices than from buyers' prices.
The shares of payments established by law are usually perceived as the respective parties' shares of the actual tax burden. Meanwhile, the coincidence of the scope of tax obligations with the economic scope of the tax is possible only by chance. What really matters is the characteristics of markets and the impact of the tax on market behavior. Ideal competitive market- one that promptly responds to taxation with adequate shifts in supply and demand.
51. Distribution of the tax burden under monopoly conditions
As in a competitive market, the decisive factor for a monopolist is flexibility of economic behavior, i.e., the ability to move under the influence of a tax to a new equilibrium point that is adequate to it without significant losses. If a monopolist, having taken full advantage of its position before the introduction of a tax, does not have the opportunity to choose a relatively equivalent situation after its introduction, it is forced to bear the tax burden. For a monopolist, flexibility is the ability to change the volume of sales (output) in a fairly wide range with relatively small shifts in the level of marginal costs. This property is an analogue of elastic supply in a competitive market.
A monopolist selling a unique product faces a choice: either fully accept the tax burden or leave the market. The scope of the tax is formed in this case in the same way as with a completely inelastic supply in a competitive market.
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Linear demand function |
The graph below is a situation where the monopolist's marginal cost is constant, which is in some sense equivalent to perfectly elastic supply. With a linear demand function, the increase in the price at which the monopolist sells covers only half of the increase in its marginal and average costs caused by the tax, and its ability to shift the tax burden is limited. The “buyers price” PS is higher than the pre-tax price P0, but the “seller price” PS is lower than P0.
What happens if the equilibrium point does not shift to more elastic parts of the demand curve? MR = P(1+1/ed). The monopolist chooses an equilibrium point such that marginal revenue is at least non-negative. Let us denote the sum (1+1/ed) by the symbol z. Obviously 0< z <\. Because in a state of equilibrium M.R.= MS, increase Δ z under the influence of tax is t, and the price increase ΔР is equal to t/ z. Hence, with constant elasticity of demand, the price on a monopolized market increases by more than the amount of the tax.
What changes if we abandon the constant marginal cost assumption? Post-tax equilibrium at a constant MC value is achieved at point E1, and at marginal costs corresponding to MC, at point E’1. These points correspond to “buyer prices” PD and PD”. It is clearly visible that the cooler line MC", i.e. the less flexible the behavior of the monopolist, the smaller the reduction in output (withQ0 up to Q1") causes tax. Accordingly, the less the price increases (from P0 to PD").
If marginal costs decrease with increasing sales, the reduction in output and increase in price acquire, other things being equal, greater proportions than if marginal costs are constant.
Difference Between Competitive and Monopolized
1. The influence of the type of tax. In a competitive market, the distribution of the tax burden does not depend on whether the tax is specific or value-based. In both cases, the relative shares of the burden borne by sellers and buyers are the same. In a monopolized market, with a value tax, a relatively larger share of the burden falls on the monopolist than with a specific tax. A value tax in the presence of a monopoly entails a smaller reduction in sales and worsens the situation of buyers to a lesser extent.
2. Distribution of the tax burden. The monopolist's share of the tax burden increases as the tax rate increases. Due to the reduction in profits, the situation for the monopolist may in some cases deteriorate relatively to a greater extent than would have happened under comparable conditions with sellers in a competitive market.
3. Position of buyers. The reduction of the monopolist's rent and its redistribution into state income does not mean its disappearance. Therefore, even if the monopolist suffers significant losses, and the price of buyers increases by less than the amount of the tax, the position of buyers remains worse than in similar circumstances in a competitive market: sales volume, ceteris paribus, is lower, and the price is higher.
SPUR
Tax. obligations ( n. O.) physical and legal persons are determined on the basis of norms established. law-vom. Taxpayers are trying to reduce taxes. burden, they can use. 2 ways: shorten n. O. due changed. structure and intensity of its eco. activities or move the tax. burden on other persons. When it comes to moving... tax. burden, significant relationships. 3 sides: state, tax payer and market. the latter's counterparties. The scope of the tax is the totality of individuals, per cat. in the end the account falls on his burden. Move tax. burden in one market entails its further movement. on others, the scope of the tax must be determined in the context of general equilibrium. For example: an economy consists of industries: A, B – goods produced, and C – units. type of mat. resources needed for production A and B, and supply C is inelastic. If an excise tax is introduced on A Þ movement. tax on production C. Suppose that the elasticity of substitution product A with product B is high, and at the same time swearing. capacity A is higher than B Þ demand for A ¯, and for B Þ demand for C. B real. ekke everything is much more complicated. But in the end the scope of action. taxes are determined: by the functions of demand and supply in each of the markets; a measure of interchangeability and complementarity of goods and services sold within this framework; production functions.
COMPETITIVE
If the market is competitive, then the possibilities of movement. tax. burden is entirely determined by the ratio. elasticity of supply and demand.
Distribution tax. burdens in a competitive market.
Schedule1. All tax. the burden falls on buyers (demand is perfectly inelastic). Graph 2. For sellers (demand is absolutely elastic). Buyers need to look for a replacement. Graph 3. To sellers (supply is completely inelastic). Chart 4. For buyers. (supply is perfectly elastic), but sellers need to look for a replacement.
That is, the general pattern: in a competitive market for a particular product or service (including labor), move the tax. the burden on the counterparties is on the other side, cat. has an advantage in the price elasticity of transaction volume. The result is determined by which side is larger. degree is ready to sacrifice part of the transactions for this product (suppliers sacrifice part of sales, and consumers sacrifice part of purchases), replacing it with something else, in order to, if possible, prevent loss of money. income.
Distribution tax. In the end, the burden did not hang. depending on which party bears the tax. obligations
Chart 5 Chart 6
The real economic impact of taxation (sales volume and loss of income) depends. not on which party the law imposes the obligation to pay the tax, but on the ratio. elastic supply and demand and from size tax
MONOPOLIZED
Supply is inelastic - the burden falls entirely on the seller
Supply is elastic
1) Graph 7. elastic demand and MC are constant. Price increase (P0P1), i.e., consumer expenses can increase even more than government income.
2) Graph 8. Variable elasticity of demand.
The monopolist includes only half the tax in the price. payments Þ in a monopoly market, unlike a competitive market, even the highest flexibility of supply does not guarantee the seller the ability to completely move. tax. burden on buyers.
Feature: under monopoly conditions, a specific tax causes, other things being equal, a greater reduction. proposals than cost. (in a competitive market - the consequences of placing a tax fixed in absolute value do not depend on whether it is specific or cost-based.
DIFFERENCE BETWEEN COMPETITIVE AND MONOPOLYZED
4. Influence of the type of tax. In a competitive market, the distribution of the tax burden does not depend on whether the tax is specific or cost-based (the relative shares of the burden on sellers and buyers are equal). On mon. market at a cost per mont-ta rel. a greater proportion of the burden than with specific. A value tax under mon-ii entails a smaller reduction in sales and worsens the situation of buyers to a lesser extent.
5. Distribution of the tax burden. The monopolist's share of the tax burden increases as the tax rate increases. Due to the reduction in profits, the situation for the monopolist may in some cases deteriorate relatively to a greater extent than would have happened under comparable conditions with sellers in a competitive market.
6. Position of buyers. The reduction of the monopolist's rent and its redistribution into state income does not mean its disappearance. Therefore, even if the monopolist suffers significant losses, and the price of buyers increases by less than the amount of the tax, the position of buyers remains worse than in similar circumstances in a competitive market: sales volume, ceteris paribus, is lower, and the price is higher.
34. Analysis of public expenditure policy: forms of expenditure, transfer of benefits, relationship of preferences. Cost efficiency.
Forms of expenses. Government assistance can take various forms:
1) Direct cash payments or subsidies - assistance from the state to private producers or consumers, which is provided free of charge at the expense of other economic agents.
2) Indirect subsidies in the form of: - reduction of tax liabilities; - preferential loans and government guarantees for these loans; - provision of goods and (or) services at prices below market prices; - government procurement of goods or services at prices above market prices; - certain regulatory standards.
Another classification of forms of government spending: 1) financing the costs of maintaining public sector organizations; 2) procurement of goods or services; 3) subsidizing enterprises and organizations supplying products to the market; 4) cash payments and in-kind payments to persons covered by social assistance and insurance programs.
Transfer of benefits
In relation to government spending, the laws associated with taxes are largely true, only in the case of government spending they operate in the opposite way. The party that loses more from the tax will benefit more from a subsidy that is symmetrical to it. Public expenditure programs (PRs) often provide benefits beyond their immediate recipients. Recipient- one who receives any benefits or funds at the expense of the public sector free of charge or on preferential terms. Scope of the OR program- the circle of persons who ultimately benefit from the program.
When it comes to cash transfers, one of the consequences of the ER program is to increase the demand for subsidized goods or services. If the supply elasticity of these goods is relatively low, the consequence is an increase in prices and a partial shift of benefits from program recipients to producers and sellers of the good or service. Transfer of benefits- the process of relative deterioration in the situation of recipients and relative improvement in the situation of sellers, producers or other participants in response to changes in the demand and supply of goods or services as a result of the introduction of an EO program. Benefit shifting is the main reason why the scope of an EO program is sometimes inconsistent with the constituency-oriented intentions of its supporters. The processes of benefit transfer are naturally associated with their distorting effects.
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In figure a), demand is relatively more elastic than supply, and both have relatively high elasticity. In figure b), demand is relatively less elastic than supply, and both have relatively low elasticity. In case a) the net losses are greater, and the increase in producer surplus exceeds the increase in consumer surplus. In case b) the benefit from the subsidy is distributed to a greater extent in favor of the consumer.
Interrelation of preferences. The recipient, other things being equal, gives preference to assistance provided in cash, which he could dispose of at his own discretion. When a redistribution program is implemented in the form of in-kind transfers or subsidies for a particular product, the preferences of those who developed and approved this program are essentially imposed on the recipient. Relationship between preferences assumes that the recipient's desire to maximize the value of his utility function is constrained by the preferences of others involved in the same spending programs. When implementing EO programs, for example, indirectly supporting the unemployed through the transfer of public funds to entrepreneurs, it is necessary to take into account the interests of the unemployed, as well as taxpayers at whose expense the program is financed. The interests of both of them do not always coincide with the interests of the recipients.
Interrelation of utilities manifests itself in the fact that the level of well-being of an individual (the value of his utility function) is determined not only by his consumer set, but also by the well-being of other members of society. An increase in the consumption of any good or service by individual A can provide positive utility to individual B and at the same time negative utility to individual C, but for individual D it may be indifferent.
Efficiency. It is important to emphasize that the distortionary effect of naturalization of aid complements the distortionary effect of subsidies and the corresponding net losses are layered on top of each other. Limited in-kind assistance programs, generally speaking, generate smaller net losses than non-limited ones, since there is no substitution effect for some recipients. At the same time, limited programs imply broken budget constraints, which, in turn, may be associated with significant distortions. Natural forms of assistance usually involve higher administrative costs, and there is a source of constant bureaucratic pressure in favor of excessive naturalization and complication of programs. In this regard, other things being equal, it is advisable to implement RR programs that restrict the freedom of choice of recipients no more than is required by a typical taxpayer. State insurance programs, compared to direct financing, turn out to be more effective when redistributive requirements are significant, but the range of potential recipients is not very different from the range of potential payers.
The problem of tax burden distribution
The distribution of taxes between buyers and sellers, consumers and producers is referred to as “distribution of the tax burden.”
Let's assume that the authorities have introduced an excise tax on a product. In this case, the following options are possible. Firstly, sellers can transfer the entire excise tax to buyers, increasing the price of the product by the amount of this excise tax. Secondly, sellers may not increase the price of the goods and thereby shift the excise tax onto their shoulders, reducing their profits. Thirdly, sellers can include part of the excise tax in the price of the goods and at the same time reduce their profit by another part of the excise tax.
The first option is usually chosen by sellers if the product is not price elastic (that is, the demand for it changes little depending on changes in its price), the second option - if the product is price elastic, the third option - if the price elasticity is close to one.
The problem of distribution of the tax burden is also considered in another aspect - in what proportion the collected taxes are distributed between consumers and producers. If only individual income tax and taxes on goods and services are classified as taxes on consumers, only corporate tax and social taxes are classified as taxes on producers, and all other taxes are classified as other taxes, then the picture of the distribution of collected taxes will be as follows. In Russia, taxes on consumers, taxes on producers and other taxes are distributed as 32: 39: 29, i.e. in more or less equal proportions between consumers and producers.
The problem of taxation costs for society
As can be seen from the above example with the introduction of an excise tax, taxes reduce market demand and supply. This leads to a drop in the optimal level of production and consumption, i.e. to a decrease in the level of well-being of society. To prove this thesis, the neoclassical theory provides the following graphical evidence (Fig. 5.2).
The introduction of a tax will shift the supply curve 5 to the left in either case. If the tax is imposed on consumers and the price of the product increases from P0 to R 1, then demand will decrease D , and after it the supply will ultimately decrease from S 0 to 5,. If the tax is shifted to producers, then supply will decrease from S 0 to S 1, due to a fall in the profits of producers, and after this there will be a shortage of goods and prices will increase with R 0 to R 1. But in any case, production volume will decrease from Q 0 to Q l, and demand will also shift to the left.
Let's pay attention to the shaded triangle in Fig. 5.2. It outlines the products that would have been produced and purchased if the government had not imposed the tax. These are those consumers who want, but cannot buy a product, and those producers who want, but cannot produce it.
Rice. 5.2. :
D - demand; S 0, S 1 – supply sizes before and after the introduction of the tax; Q 0, Q 1 – production volumes before and after the introduction of the tax
Analysis of the problem of taxation costs for society from a neoclassical position leads to the conclusion; taxes are necessary for the existence of the state, but society pays a high price for this, reducing the potential volume of national income and, accordingly, national welfare.
Neo-Keynesian theory offers the opposite view. While not arguing that taxes reduce social welfare, neo-Keynesians emphasize that taxes finance government spending, and this stimulates aggregate demand that exceeds the reduction in demand from taxes. As a result, the level of well-being of society as a whole increases.
For proof they refer to the effect of the action balanced budget multiplier, Haavelmo's theorem, named after its author, a Norwegian Nobel laureate (1911 – 1999), which means that an increase in taxes and government spending by the same amount will cause an increase in GDP by the same amount. Let's assume that the country's marginal propensity to consume is 0.8, and the demand-supply multiplier is 5. The government for 100 billion rubles. increases taxes so that by 100 billion rubles. increase government spending, i.e. keeping the budget balanced. However, the increase in taxes will reduce taxpayers’ consumption not by 100 billion rubles, but by a smaller amount – 80 billion rubles. (after all, the marginal propensity to consume is 0.8), and the consumption of the entire society will decrease, taking into account the multiplier, by 80 5 = 400 billion rubles. Government expenses will increase by 100 billion rubles, and the expenses of the entire society, taking into account the multiplier, will increase by 100 5 = 500 billion rubles, i.e. society will receive an increase in social welfare in the amount of 100 billion rubles. (500 billion rubles – - 400 billion rubles).
In other words, if the entire increase in taxes is used to increase government spending, thereby maintaining budget balance, then, according to Haavelmo’s theorem, this results in additional GDP growth. In our example, GDP will increase by 100 billion rubles. due to the fact that the tax multiplier (equal to 4, since Δ Y/ΔT = 400/100) is less than the government spending multiplier (equal to 5, since Δ Y/ΔG = 500/100). However, such a conclusion from this theorem can only be valid in conditions of a low tax burden, since the Laffer curve demonstrates that a high tax burden reduces the economic activity of taxpayers and, accordingly, slows down GDP growth, which will be difficult to stimulate even with increased government spending.
How will GDP react to an increase in taxes without a corresponding increase in government spending, for example, when taxes are used to reduce the budget deficit? In this case, the neoclassical conclusion will apply - GDP growth will slow down. Let us explain this using the example of an increase in insurance premiums for compulsory social insurance in Russia since 2011 to cover the Pension Fund deficit. According to estimates, the increase in insurance premiums to the budget that year amounted to 928 billion rubles, the tax multiplier was equal to 4.56, which led to a decrease in potential GDP by 4432 billion rubles.
The dilemma of tax efficiency and fairness
A tax that is effective from the point of view of tax authorities is not always fair from the point of view of taxpayers. An example would be the personal income tax in Russia, paid at a flat rate of 13%.
Russian tax authorities claim that after the transfer of personal income taxes in the late 1990s. From a progressive scale to a flat one, many wealthy taxpayers brought their taxable income “out of the shadows” and, as a result, the collection of this tax increased. At the same time, tax authorities and wealthy taxpayers proceed from the benefit principle, according to which households should pay taxes in proportion to the public benefits they receive from the state. And since rich taxpayers in Russia clearly do not benefit from more public goods than other taxpayers (free education and healthcare, roads, etc.), they should not pay personal income tax at a higher rate than other taxpayers.
However, the bulk of Russian taxpayers (and taxpayers around the world) adhere to a different principle – the principle of ability to pay tax, according to which taxes are levied in accordance with the taxpayer’s income. After all, the amount of income significantly aggravates or alleviates the severity of the tax, since a tax of 650 rubles. from a salary of 5,000 rubles. it falls more heavily on the taxpayer than the tax of 6,500 rubles. to another taxpayer from his salary of 50,000 rubles. In addition, this principle corresponds to the social function of taxes aimed at smoothing income inequality. However, opponents of the ability to pay principle point out that higher personal income tax rates are unfair to the most industrious and enterprising members of society.
Unlike Russia, in the rest of the world the second principle ultimately dominates over the first, and therefore discussions about the size of income and corporate taxes are usually not about which tax scale to switch to - flat or progressive - but about what should be be progressive income and corporate tax rates.
Principles of formation of the tax system
1. Economic efficiency - the tax system should not conflict with the efficient allocation of resources (excessively high taxes reduce incentives to work)
2. Administrative simplicity - the administrative system should be simple and relatively inexpensive to use. The administrative costs of the tax system depend on a number of factors: the required documentation, the complexity of reporting, and the differentiation of tax rates.
3. Flexibility – the tax system must be able to quickly respond to changing economic conditions.
4. Political responsibility - the tax system must be designed in such a way as to convince people that they are paying so that the system can more accurately reflect their preferences.
5. Fairness – The tax system must be fair in its treatment of different individuals.
There is a distinction between horizontal and vertical justice. Horizontal equity means that people are taxed equally in every way. This suggests that a tax system that discriminated against people based on race, color, or creed would be horizontally unfair.
Vertical equity means that some people by position pay higher taxes than others.
There are vertical equity issues:
1. determine who should pay higher rates
2. put into practice and decide that this person must pay slightly more than others, obligated to pay taxes at higher rates
The taxpayer behaves in such a way as to ultimately reduce the portion of the tax burden that he has to pay. To achieve a reduction in the tax burden, a taxpayer can use two legal ways:
1. reduce tax liabilities by changing the structure and intensity of its economic activities, i.e. reducing taxable activities and expanding activities that give the right to tax benefits
2. shift the tax burden to others
Distribution of the tax burden in a competitive environment
The ability of taxpayers to shift taxes to their counterparties depends on the nature of the markets in which they interact. If the market is competitive (in other words, no seller or buyer is able to influence the price), then the possibilities of shifting the tax burden are entirely determined by the relationship between the elasticities of supply and demand. To make this clear, let us turn to a kind of limiting case, namely markets with perfectly elastic and perfectly inelastic supply and demand, and assume first that the tax is set at a fixed amount per unit of good or service.
Such taxes are usually called specific in contrast to cost taxes, which are much more common in practice. Liabilities for value taxes are established based on the value of the object of taxation, for specific ones - per unit of goods or services. Thus, a specific import tariff on cars would imply that the importer pays a tax in proportion to the number of imported cars, regardless of differences in their prices, a specific excise tax on tobacco products - payment of a fixed amount for each pack sold (either per thousand cigarettes, or per kilogram of tobacco, etc.) .p.; the only important thing is that tax obligations are determined in relation to the natural, and not the monetary measure).
Let us assume that demand is absolutely inelastic, that is, the volume of purchases does not depend on price. Of course, this does not occur in practice, but the demand curves, for example, for bread and electricity in some areas are almost vertical, and if equilibrium is achieved in such an area, then the assumption made about the inability of consumers to vary the volume of purchases does not diverge too much from reality.
In Fig. Figure 6.1a shows how the equilibrium point shifts when a tax is introduced. If tax liabilities are borne by suppliers, a specific tax of U means for them a corresponding increase in costs for each unit of goods. The supply curve moves up by U. Due to inelasticity of demand, buyers are forced to accept the new price P 1 = P 0 + U along with it comes a tax burden of UQ 0 .
Let now demand be absolutely elastic (Fig. 6.1b). In this case, although the supply curve still shifts upward, consumers are not willing to pay any price greater than P 0, their reaction in this case is expressed in a decrease in the quantity of goods purchased from Q 0 before Q 1,. Unable to include tax in the price, sellers are forced to pay it in the amount of UQ 1 by reducing their own income. If before the introduction of the tax their revenue reached P 0 Q 0 , then now the revenue is reduced to P 0 Q 1 , and the sellers share only the difference (P 0 Q 1 – UQ 1). Thus, it is the sellers who are subject to the tax.
Figure 6.1. Distribution of the tax burden in a competitive market with absolutely elastic and absolutely inelastic demand.
Q- quantity of goods, R - price; index 0 marks the values of these variables corresponding to the equilibrium point E 0 achieved in the absence of tax, index 1 - values corresponding to the equilibrium point E 1 achieved after the introduction of the tax, U- tax amount.
A) demand is completely inelastic b) demand is perfectly elastic.
Let us now consider the situation with a completely inelastic supply (Fig. 6.2a). This time, sellers are unable to influence the market situation, since they do not have the opportunity to respond to increased costs by reducing supply. The vertical supply curve “shifts upward” while remaining in place (in the short term, industries with a predominance of semi-fixed cost components can provide some approximation to a similar situation). The equilibrium point remains the same, so buyers do not perceive any change. The tax burden falls entirely on sellers, whose net income is reduced by UQ 0 .
Let us finally turn to the situation with a perfectly elastic supply (Fig. 6.2 b). Since sellers have the ability to vary the quantity supplied indefinitely, they will not sell the product at a price that does not compensate for the increase in costs. Supply will decrease and price will rise until buyers take on a tax burden of UQ 1. The tax is fully included in the price ( P 1 = P 0 + U). However, sellers still find themselves at some loss: previously they were able to sell a larger quantity of a given product at the same price, but now they are obviously forced to partially switch to trading in other goods.
Figure 6.2. Distribution of the tax burden in a competitive market with perfectly elastic and perfectly inelastic supply.
The designations are the same as in Fig. 6.1.
A) supply is completely inelastic b) supply is perfectly elastic.
If demand is absolutely elastic or supply is absolutely inelastic, tax is included in the price tP 0 . Additional costs for sellers due to taxation are respectively tP 0 Q 1 And tP 0 Q 0 . Meaning Q 1 may vary depending on the nature of the demand function.
The simplest situations considered allow us to grasp the general pattern : in a competitive market for an individual product or service (including labor), the party that has an advantage in the price elasticity of the volume of transactions succeeds in shifting the tax burden to counterparties.
For sellers, the tax means an increase in costs, and they adapt to the tax by reducing supply. For buyers, this generally means rising prices, to which they in turn adapt by reducing demand.
The tax system creates a certain financial burden on business entities and individuals who, in accordance with the law, must pay established taxes. The total amount of taxes paid is called the tax burden of the taxpayer. The economic literature has not yet developed a unified approach to defining the concepts of “tax burden”, “tax burden”, “tax pressure”, etc. The versatility of these concepts is due to the difference in the levels at which the tax burden is determined, methods of its calculation, including the choice of initial indicators, and other conditions.
At the macroeconomic level or at the level of the national economy, the tax burden on the country’s economy and as a whole, its most important sectors (industry, agriculture, financial market, etc.), and on the population is determined.
A similar indicator of the tax burden at the regional level characterizes the average level of withdrawal of income from businesses and entities of a specific territory, for example, a constituent entity of the Russian Federation.
At the level of enterprises, organizations or private entrepreneurs, the tax burden characterizes not the average, but the specific level of withdrawal of income of a particular taxpayer or his tax burden.
Finally, the tax burden or burden is determined at the individual or family (household) level.
The tax burden at the macroeconomic level is usually calculated as the ratio of the total amount of taxes and fees to GDP. In this case, the amount of taxes can be represented by the amount of actual payments received into the consolidated budget or the amount of accrued taxes and fees subject to payment; it may not take into account certain types of payments (for example, contributions to extra-budgetary funds), etc. Advance tax payments, amounts of collected penalties, fines, etc. have a distorting effect on the amount of taxes. When assessing GDP, an adjustment is made to its volume, taking into account the shadow sector of the economy, not covered by taxes.
The economic meaning of the tax burden at the macro level is to show what share of a country's GDP is redistributed through taxes. It also characterizes the average level of withdrawal of income of subjects of the national economy in a certain period of time (usually a year).
From the data in table. 18.4 it follows that in modern conditions in the Russian Federation the main tax burden is borne by the extractive industries, in which the tax burden reaches almost 70%. The smallest tax burden is placed on the agricultural sector, where it does not exceed 4%. As a result, it is clear that the tax burden is significantly shifted towards oil and gas production, which creates a dependence of budget revenues on price fluctuations in international energy markets.
Methods for determining the tax burden of enterprises and entrepreneurs are even more diverse. A more accurate assessment of the tax burden of a business entity can be obtained using a system of indicators that will reflect the main one (as the ratio of taxes to newly created value)
Tax burden on the main sectors of the economy in the Russian Federation for
2006*
The tax burden was calculated based on a comparison of value added with the amounts of taxes and fees received into the budget system administered by the Federal Tax Service of Russia (without a single social tax and contributions to extra-budgetary funds).
and the full tax burden (taking into account the amount of tax debt, as well as penalties and fines for violation of tax laws).
In turn, taxpayers can shift their tax burden to others. Most often, the seller taxpayer shifts his tax burden forward, i.e. on buyers, including taxes in the selling price of products. When moving back, the buyer shifts the tax burden onto the sellers, dictating their terms of delivery and paying less for the goods purchased if market conditions allow it.
As a result, when assessing the real tax burden, it is necessary to take into account who is the real, and not the nominal, tax bearer. In particular, citizens, when buying food and other goods, actually act as persons to whom the tax burden of sellers is transferred, primarily indirect taxes included in the price of goods and services.
The ability to shift the tax burden depends on the nature of the market in which taxpayers operate. Options for distributing the tax burden in a competitive and monopoly environment are discussed in detail in the economic literature.
In a competitive market, the possibility of tax shifting is determined by the nature of the relationship between supply and demand, as well as the type of tax rate, which can be specific (in the form of a fixed amount per unit of tax base in kind) or ad valorem (as a percentage of the cost tax base).
Suppose that a specific tax rate is established for a unit of a certain product (piece or kg), which does not take into account the difference in prices of its different varieties or other characteristics. Let us accept the hypothetical condition that demand is absolutely inelastic, i.e. the volume of purchases does not depend on price and the demand line C takes the form of a vertical (Fig. 18.1, b). The equilibrium of supply and demand is indicated by point E0. Then, when a tax is introduced, the supply line P0 shifts upward, occupying the position Pr and the equilibrium point E0 is at point Eg. Due to the inelasticity of demand, the tax burden is completely shifted to the buyer, who pays for the product T an increased price CR, including tax H.
If demand is absolutely elastic (Fig. 18.1, a), line C will take a horizontal position. When the supply line shifts upward, the buyer, not wanting to pay a higher price, will purchase less goods (Tj) for the same money. If the seller cannot include the tax in the price, he will be forced to accept the tax burden when selling the same volume of goods, increasing his costs. In this case, in any case, the H tax is shifted to the seller (or manufacturer), reducing his income. 
a) demand is perfectly elastic b) demand is perfectly inelastic
Rice. 18.1. Shifting the tax burden with absolutely inelastic and elastic demand
in a competitive market:
T - quantity of goods: C - price of goods; E is the equilibrium point of supply and demand; N - tax; C - demand line; P - supply line
With a completely inelastic supply, in the case of the introduction of tax H (Fig. 18.2, a), the tax burden is transferred entirely to sellers. With perfectly elastic supply, sellers will raise prices to compensate for rising costs. This will lead to a decrease in supply and an increase in price by the amount of tax H, i.e. to the transfer of tax to buyers (Fig. 18.2, b).
Consideration of the simplest conditional situations allows us to conclude that shifting the tax burden in a competitive market for a certain type of product or service is possible to the counterparty who does not have advantages in the elasticity of the volume of transactions by price. At the same time, shifting the tax to the seller increases his costs and may be accompanied by a reduction in the supply of goods on the market. Shifting the tax to the buyer leads to an increase in prices, which, in turn, can be reflected in a decrease in demand for goods.
Resolving the situation of tax shifting in favor of the seller or buyer depends on who is more able to withstand changes in market conditions. When demand falls and supply increases, the seller is forced to bear the tax; when demand increases and supply decreases, the tax burden is shifted to the buyer.
a) supply is perfectly inelastic b) supply is perfectly elastic 
Rice. 18.2. Shifting the tax burden with absolutely inelastic and elastic supply in a competitive market (the designations are the same as in Fig. 18.1)
So, in a competitive market, the shares of sellers and buyers who bear the tax burden primarily depend on the nature of the supply and demand curves. The advantage in shifting taxes goes to the party that most quickly takes advantage of changes in the market situation. In this case, the price for the consumer usually increases by a smaller amount compared to the amount of the tax.
Redistribution of the tax burden when introducing a tax and under monopoly conditions, in contrast to a competitive market, has its own characteristics. In most cases, the monopolist himself sets the quantity of products offered for sale, in fact setting the equilibrium point on the demand curve. With this, he chooses a level of output at which the costs of producing additional products or marginal costs will correspond to the additional income received.
If the marginal cost curve is horizontal (Fig. 18.3), the amount of tax H that will fall on producers and consumers will depend on the shape of the demand curve. In the case of a linear demand function (Fig. 18.3, a), the price for the consumer will increase by half the tax, i.e. consumers and producers will share its burden. With a demand curve with constant elasticity (Fig. 18.3, b), the price increase will be greater than the amount of the tax, and the excess of prices over the amount of the tax will fall on the consumer.
In a monopolized market, the ability to shift the tax burden to consumers is limited by the fact that the monopolist producer usually pays monopoly rent and thereby loses the benefits derived from its monopoly position in the market. 
Under monopoly conditions, the consequences of introducing a tax with a fixed (in monetary terms) or interest rate for the manufacturer are different. It is more acceptable to set interest tax rates at which the marginal income 
a) with linear supply and demand curves b) with demand curves with constant elasticity
Rice. 18.3. Shifting the tax burden in a monopolized market:
C - price: T - product: N - tax; C - demand; Пд - marginal income; Pi0 is the marginal cost before the introduction of the tax; Pi1 - marginal costs after the introduction of the tax
the monopolist producer is reduced by a smaller amount than the amount of tax per unit of production on average. Such taxation is more neutral than imposing flat tax rates, leading to a smaller reduction in output.
Taxes with different names and tax bases can often be equivalent in terms of the source of the tax, i.e. to whom they are ultimately assigned. These are personal income tax and VAT or, especially, sales tax, which, at the same flat tax rate (for example, 13 or 18%), will be equivalent, since they are actually withdrawn from the income of individuals. The differences between these taxes will be determined by the point in time when tax payments are received by the state and the effectiveness of monitoring the completeness of accounting for the tax base.
